* President Saakashvili challenged by billionaire's coalition
* Prison abuse scandal video stokes tensions before vote
* Parliament to gain more power in ex-Soviet republic
By Margarita Antidze
TBILISI, Oct 1 (Reuters) - President Mikheil Saakashvili faced his biggest test in a decade in power on Monday as Georgians voted in a parliamentary election overshadowed by a prison abuse scandal that has fueled accusations of government repression.
Saakashvili, who swept to the presidency after the Rose Revolution of 2003 and led the country into a brief, disastrous war with Russia in 2008, says his main challenger Bidzina Ivanishvili would move the former Soviet republic away from West and bring it closer to Moscow once again.
Ivanishvili, a tycoon with a fortune nearly half the size of Georgia's economy, hopes the prison scandal will convince undecided voters that Saakashvili has become an undemocratic leader who tramples on rights and freedoms.
Video of torture, beatings and sexual of prison inmates led to street protests after it was aired on two television channels opposed to Saakashvili. They undermined the president's image as a reformer who had imposed the rule of law and rooted out post-Soviet corruption.
"I'm voting against violence and abuse - how can I do otherwise after what we have all seen on TV?" Natela Zhorzholia, 68, said outside a polling station at a school in the capital, Tbilisi.
She said she would vote for Ivanishvili's six-party Georgian Dream movement.
The election also heralds constitutional changes which will affect any future leadership.
Saakashvili, 44, must step down after a presidential vote next year, when reforms will weaken the role of head of state giving more power to parliament and the prime minister.
But if his United National Movement retains its dominance of parliament, that may give him a way to remain in charge of the country of 4.5 million, an important gas and oil transit route to the West,
"Besides being a contest for parliament, it is also a shadow leadership election," said Thomas de Waal, a Caucasus expert at the Carnegie Endowment for International Peace in Washington.
Saakashvili highlighted the importance of the vote after casting his ballot with his Dutch wife and their young son, and said: "The fate of our country's statehood is being decided today".
The vote will affect "not only this nation but what happens to the European dream...what happens to the idea of democracy... what happens to the idea of reforms in this part of the world," he said.
Many Georgians just want political and economic stability. The economy, hit by the 2008 war and the global financial crisis, has been growing again since 2010 but inflation is likely to hit 6-7 percent this year.
"I voted for peace and stability," Georgy Ugrekhelidze, 76. "I want this government to carry out what it has started."
Saakashvili's supporters say the election could determine whether Georgia moves closer to Russia or remains a U.S. ally. They accuse Ivanishvili, who made much of his money in Russia, of being a Kremlin stooge, a charge he denies.
During the war, Russia strengthened its control of the breakaway regions of South Ossetia and Abkhazia, which make up about one-fifth of the Caucasus nation's territory.
The West wants a stable Georgia because of its role as a conduit for Caspian Sea energy supplies to Europe and its pivotal location between Russia, Iran, Turkey and Central Asia.
"The most important thing is that those who are dissatisfied should not create disorder," said voter Yelena Kvlividze, 45.
Ivanishvili told a rally on Saturday: "This regime's hours are numbered."
But has also said Georgian Dream will accept any outcome deemed legitimate by international observers.
A poll by the U.S. National Democratic Institute in August gave UNM 37 percent support against 12 percent for Georgian Dream but showed 43 percent of respondents could vote either way. There have been no major polls since the abuse scandal.
Elected in 2004 after the Rose Revolution protests toppled President Eduard Shevardnadze, a former Soviet foreign minister, Saakashvili cultivated close ties with Europe and the United States and sought to bring Georgia into NATO.
He curbed police bribe-taking, made frequent power outages a thing of the past and presided over an economic resurgence.
But opponents say he has curtailed democracy, persecuted the opposition, pressured courts and controlled the media. He also faces criticism for leading Georgia into the war with Moscow in which Russian forces routed the army.