* Subway tunnels flooded, could be out of service 4-5 days
* Mayor says full bus service to be restored Wednesday
* For some New Yorkers, walking may be best option (Adds statement about timetable for restarting train service)
By Edith Honan and Martinne Geller
NEW YORK, Oct 30 (Reuters) - With New York City's subway system paralyzed by Sandy's crippling blow, millions of commuters are rethinking how they will get to work this week, and they are taking it one step at a time.
The storm, which killed 23 people in New York state, closed roads and bridges and flooded tunnels, garages and rail yards, dousing the nation's largest mass transit system with saltwater, which is corrosive to its electrical system.
"The New York City subway system is 108 years old, but it has never faced a disaster as devastating as what we experienced last night," Joseph Lhota, chairman of the Metropolitan Transit Authority, said in a statement on Tuesday.
He later said that water was "literally up to the ceiling" at downtown Manhattan's South Ferry train station.
The subway could be out of service for four or five days, New York Mayor Michael Bloomberg said, as the authority checks the entire system for saltwater damage. Late on Tuesday, Lhota issued a statement saying the agency would be able to discuss a timetable for restarting the system by mid-day on Wednesday.
This could prompt hordes of New Yorkers to lace up their walking shoes. Some said they did not mind.
"You can't go three to four days without pay," said Anthony Perrone, a 31-year-old consultant on Wall Street, who said he was planning for an hour-and-15-minute walk to work. He said he was annoyed, but noted others had suffered more.
His brother, who lives in the waterfront neighborhood of Howard Beach, lost two cars to flooding, Perrone said. "I can't complain," he said.
Throughout the day on Tuesday, as the city slowly crept back to life, crews assessed the damage to the subway system's tunnels and elevated tracks. Restoring the system is likely to be a gradual process, MTA spokeswoman Deirdre Parker said.
All seven subway tunnels running under the East River from Manhattan to Queens and Brooklyn took in water, Parker said.
"It's really hard to say which areas will come back first," she said, adding it will likely be a combination of limited subway and bus service. "It will come back gradually."
As for buses, the city resumed limited service on Tuesday and full service will return on Wednesday, Bloomberg told a news conference.
The city counts an average of 5.3 million riders each weekday. The system, which runs around the clock, comprises 21 subway routes linked by 468 stations, and stretches across 660 miles (1,062 km) of track.
To ease some of the burden, Bloomberg signed an executive order permitting taxi cabs to pick up multiple passengers, including when they already have passengers. Restrictions on livery cabs have also been relaxed, allowing the non-metered, non-yellow cars to pick up people on the street anywhere in the city.
The Brooklyn-Battery Tunnel and the Queens Midtown Tunnel remained closed due to flooding. An MTA spokeswoman said the damage cannot be assessed until the water recedes.
The MTA's Metro North Railroad lost power on its suburban Hudson and New Haven lines, while there was flooding in an East River tunnel used by the Long Island Rail Road, the agency said.
New Jersey's PATH commuter train, which connects New Jersey with New York City, will likely remain suspended for at least a week to 10 days, New Jersey Governor Chris Christie said. He said commuters should rely more on ferries and driving.
But with telecommunications disruptions still causing spotty coverage for cell phones and telephones the day after the storm, some New Yorkers were more worried about connecting with their families than about their commutes.
"I work all the way downtown and I don't even care, to be honest," said Brandon Brown, 30, who lives in midtown Manhattan and works in the human resources department of a financial services firm. "My primary concern is my family. I'm not worried about work or commuting right now." (Additional reporting by Dhanya Skariachan, Barbara Goldberg and Luciana Lopez; Editing by Eric Beech, Paul Simao, Jim Loney and Lisa Shumaker)