OBJECTIVES: Primary * Determine the maximum tolerated dose of neoadjuvant oxaliplatin and capecitabine when combined with radiotherapy in patients with locally advanced adenocarcinoma of the rectum. (Phase I closed to accrual as of 06/2005.) * Determine the rate of complete pathological response in patients treated with this regimen. Secondary * Determine the overall survival of patients treated with this regimen. * Determine the rate of local and overall failure in patients treated with this regimen. * Determine the utility of TS, TP, DPD, ERCC-1, and apoptosis to predict response in patients treated with this regimen. * Determine the rate of pathologic down-staging in patients treated with this regimen. * Determine the safety and toxicity of this regimen in these patients. * Determine the rate of sphincter-saving rectal surgery in patients treated with this regimen who had been deemed candidates for abdominoperineal resection at diagnosis. OUTLINE: This is a multicenter, phase I (phase I closed to accrual as of 06/2005), dose-escalation study of oxaliplatin and capecitabine followed by a phase II study. * Phase I (closed to accrual as of 06/2005): Patients undergo radiotherapy once daily 5 days a week for 5.5 weeks and receive oral capecitabine twice daily on days radiotherapy is administered. Beginning on day 1 of radiotherapy, patients also receive oxaliplatin IV over 2 hours on days 1, 8, 15, 22, and 29. Cohorts of 3-6 patients receive escalating doses of oxaliplatin and capecitabine until the maximum tolerated dose (MTD) is determined. The MTD is defined as the dose preceding that at which 2 of 3 or 2 of 6 patients experience dose-limiting toxicity. * Phase II: Patients undergo radiotherapy and receive capecitabine and oxaliplatin as in phase I at the MTD. All patients undergo curative-intent surgery 6-8 weeks after the completion of chemoradiotherapy. Patients are followed every 3 months for 3 years and then every 6 months for 2 years. PROJECTED ACCRUAL: A total of 31-40 patients (6-15 for phase I \[phase I closed to accrual as of 06/2005\] and 25 for phase II) will be accrued for this study within 2 years.
DISEASE CHARACTERISTICS: * Histologically confirmed adenocarcinoma of the rectum * Tumor involving the distal 12 cm of the rectum (above the anal verge) * Clinically staged by endoscopic ultrasound with one of the following criteria: * T3-T4 disease * Evidence of lymph node involvement, defined by the presence of ≥ 1 enlarged peri-rectal lymph node (≥ 1 cm in size) * No known distant metastases PATIENT CHARACTERISTICS: Age * 18 to 75 Performance status * ECOG 0-1 OR * Karnofsky 70-100% Life expectancy * More than 1 year Hematopoietic * WBC ≥ 3,000/mm\^3 * Absolute neutrophil count ≥ 1,500/mm\^3 * Platelet count ≥ 100,000/mm\^3 Hepatic * Bilirubin normal * AST and ALT ≤ 2.5 times upper limit of normal Renal * Creatinine normal OR * Creatinine clearance ≥ 60 mL/min Cardiovascular * No symptomatic congestive heart failure * No unstable angina pectoris * No cardiac arrhythmia Other * Able to receive oral medication * No other malignancy within the past 5 years except nonmelanoma skin cancer * No prior or concurrent significant neuropathy * No prior allergic reaction attributed to compounds of similar chemical or biological composition to study drugs * No ongoing or active infection * No other concurrent uncontrolled illness * No psychiatric illness or social situation that would preclude study compliance * Not pregnant or nursing * Negative pregnancy test * Fertile patients must use effective double-method contraception during and for 3 months after study participation PRIOR CONCURRENT THERAPY: Biologic therapy * No concurrent granulocyte-stimulating factors Chemotherapy * No prior chemotherapy Endocrine therapy * Not specified Radiotherapy * No prior pelvic radiotherapy Surgery * Not specified Other * No other concurrent investigational agents * No other concurrent anticancer agents or therapies