* Fire 22 percent contained

* Officials optimistic about saving Mount Wilson site

* Area nearly the size of Chicago burned, 62 homes lost (Adds weather details, background, quotes from fire line)

By Steve Gorman and Dan Whitcomb

LOS ANGELES, Sept 1 (Reuters) - Firefighters took advantage of a turn in the weather on Tuesday to gain ground against the enormous wildfire burning for a week above Los Angeles, saying they now hoped to drive the flames away from historic Mount Wilson, a key telecommunications site.

But while higher humidity and cooler temperatures helped crews make their first significant headway against the fire -- achieving 22 percent containment, up from 5 percent on Monday -- officials warned that it was too early to believe that they had the upper hand.

The blaze already has charred 127,000 acres (51,000 hectares), an area nearly the size of Chicago, destroyed at least 62 homes, and is still capable of terrible destruction, fire commander Mike Dietrich said.

Two firefighters were killed in the fire on Sunday, and at least three civilians have been injured.

"If I were in a boxing match I think we are even today," Dietrich said. "This fire still has a lot of potential and it's a very big animal out there."

The outbreak of wildfires across California was burning through cash at a rate that alarmed leaders in Sacramento, who are grappling with a still-growing state budget deficit.

As of Monday, just two months into the fiscal year and before the state's usual fire season had begun, California had already spent over half of its annual firefighting budget. [ID:nN01498797]

The Station Fire alone, roaring out of control since last Wednesday though the San Gabriel Mountains of Angeles National Forest, has cost $14 million to fight so far.

A flare-up along the fire's southwestern flank still threatened some foothill neighborhoods just inside Los Angeles city limits, and fire commanders said it would probably take another two weeks to fully contain the blaze.

But with 3,600 people on the fire lines, Dietrich said the overall growth of the blaze slowed for the first time on Tuesday and that he was a lot more optimistic.

'A VERY ANGRY FIRE'

"Substantial progress has been made," he said. "The weather has helped us, certainly. I do not believe that we have totally turned the corner. The fire has laid down but ... it could be a very angry fire again."

Officials said that for the first time they were feeling confident about their ability to save structures atop Mount Wilson, a hub for broadcast towers and other telecommunications equipment, as well as home to a historic observatory.

Flames around the peak had eased, and fire crews were sent back to the site around dawn on Tuesday, days after they were withdrawn for fear of being engulfed.

Meteorologists say the change in weather was due mostly to wind patterns pulling in more damp air from northern Mexico and the Baja region -- a phenomenon called monsoonal moisture.

They said there may also be a slight benefit from excess moisture associated with Hurricane Jimena off Mexico's coast. [ID:nN01486551]

"It's huge difference," fire Captain Art Burgess, with a crew mopping up hot spots near one neighborhood, said of the higher humidity.

Residents who stayed put despite evacuation orders looked on as dozens of firefighters, backed by bulldozers and an aerial assault from water-dropping helicopters, quickly halted flames creeping down a steep slope at the end of their street.

"Boy, they did such a wonderful job," said Carissa Totalca, 55, a nurse who has lived in the area for years. "I've never seen them in action before."

The weather change is a mixed blessing, though, posing the potential for gusty winds and dry lightning strikes that could ignite new blazes in dense, drought-parched brush. Moist air also kept smoke from the fire closer to the ground, making it more difficult to fight with aircraft in some spots.

Police continued to evacuate foothill-area homes on Tuesday, although firefighters were able to conduct controlled burns overnight to push flames back into the forest, and some residents were allowed to return home.

The cause of the wildfire, the biggest of several burning throughout the state, remains under investigation. (Additional reporting by Mary Milliken; editing by Mohammad Zargham)

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