UPDATE 1-Winehouse cancels Grammys, may appear on satellite

(Updates with possible Grammy appearance, other details, previous LONDON)

By Sue Zeidler

LOS ANGELES, Feb 7 (Reuters) - British soul singer Amy Winehouse's personal issues again derailed her career on Thursday as U.S. officials rejected her application for a visa, causing her to cancel plans to attend the Grammy awards.

The artist's label, Universal Music, and Grammy organizers were assembling a plan to have Winehouse perform via satellite at the top U.S. music awards being held in Los Angeles on Sunday, said a source close to the star.

While news of the visa rejection caught few by surprise due to the star's well-chronicled drug and legal issues, many called it unfortunate for Winehouse and the Grammys because the singer is among the most-nominated performers. Winehouse entered a rehab clinic last month for drug addiction.

"I think this is a first time a top contender for all of the top awards has been barred from attending. It's a tragic blow for her comeback," said Tom O'Neil, columnist for awards Web site Envelope.com.

Even with a beamed-in performance, Winehouse will not be shown on the red carpet or in the cutaway shots of the audience, which may underscore her absence.

"It could also be really embarrassing for the Grammys, if she sweeps the awards and she's not there," O'Neil said.

A spokesman for Winehouse, 24, said in a statement she had been progressing well since entering a rehabilitation clinic two weeks ago. "Although disappointed with the decision, (she) has accepted the ruling and will be concentrating on her recovery," the spokesman said.