(FORTUNE Magazine) – Lounging in his gold-bedecked 727 not long ago, Donald Trump explained one of his rules of investing: "I only do a deal if I think it has the greatest glamour."

Yet his latest deal couldn't be farther from the spotlights. His company is competing to build a casino in French Lick, Ind., a rural town that smells of sulfur (blame natural mineral springs), sits in Indiana's highest-unemployment county (10.1%, vs. the state's 5.6%), and houses a museum devoted to hair (one prized item: an 1865 wreath made from human strands). The most glamorous thing about French Lick, in fact, is probably its most famous resident: NBA Hall of Famer Larry Bird, president of the Indiana Pacers and, unfortunately for Trump, a bidder for the casino.

That's setting up a rivalry of incredible height vs. unbelievable hair in this small town. "You'd think this was Larry's to lose," says Jerry Denbo, French Lick's state representative, who succeeded last year in his 13-year quest to get the state to okay a casino for his city. "But he knew going in that there's no favoritism."

The prize is a spot of land sitting between two massive, historic hotels--the 2,600-acre French Lick Springs Hotel and the shuttered West Baden Springs Hotel, which once boasted the world's largest free-span dome (a record taken by the Astrodome in 1965). Any casino there, according to estimates, could generate about $60 million in gaming revenues--small stakes for either the self-declared $6 billion man or for Bird and his partners.

Still, the lobbying's intense. Bird's group, which includes local businessmen, the former governor of Nevada, and Barbary Coast casino owner Coast Casinos, says that its more than $50 million project will include a 50,000-square-foot casino, up to 1,200 slot machines--and a museum chronicling the history of Larry Bird. Bird says he'll donate all his profits to the town, and the group insists its casino will indirectly generate over 1,100 new jobs and $139 million in economic activity. (Bird declined comment. His agent explained that Bird had refused other interviews and that if he talked to FORTUNE, he'd be obliged to then call back every previous reporter: "He's a very fair-minded-type person.")

To counter, Trump Hotels & Casino Resorts plans to spend $123.5 million to buy the West Baden hotel, install 1,000 slot machines, a 12-table poker room, and--take this, Bird!--bring in another Southern Indiana native, U.S. Open champ Fuzzy Zoeller, to help redevelop the local golf courses. Still, Trump realizes he might, for once, be the underdog. "In French Lick, Larry has the advantage," he says (noting, however, "In Manhattan, Trump has the advantage"). There's also one other problem: The Indiana Gaming Commission says it's training a gimlet eye on Trump's bid, due to the company's $1.8 billion of debt and ongoing flirtation with bankruptcy.

A third group--which includes a local real estate development company, a retired state policeman, and French gaming firm Groupe Tranchant--has proposed its own $65 million offering. The state's expected to pick a winner by the end of July.

Now battle lines are forming in this city that until the late 1940s was a sort of Las Vegas of the Midwest (Al Capone, Bing Crosby, and Lana Turner used to take advantage of the sulfur springs and the flourishing illegal casino trade). "I don't care if they all dropped out as long as Trump stays," says Geneva Street, the owner of Geneva's Hair Clinic in West Baden. "Who offers the county the most money, that's who I want in here. I wish Larry Bird had went in with the Trump group." Less than a mile away, Marilyn Fenton, owner of the Village Market antique store, says she just wants Groupe Tranchant to lose. "The French knife America in the back every chance they get," she notes. If Trump wins, jokes Fenton, she just hopes "that he's solvent that week."

--Daniel Roth