On August 17, 1995, about 2205 Alaska daylight time, a wheel equipped Waco UPF-7, N134Q, crashed during a forced landing, adjacent to the Lake Hood strip, Anchorage, Alaska. The airplane was being operated as a visual flight rules (VFR) local area sightseeing flight conducted under Title 14 CFR Part 91 when the accident occurred. The airplane sustained substantial damage. The certificated airline transport pilot and one passenger received minor injuries. A second passenger received serious injuries. Visual meteorological conditions prevailed. The flight originated at the Lake Hood strip about 2150. The pilot reported that he was in a right downwind landing pattern for runway 31 at midfield and 700 feet above the ground when the engine suddenly quit. He turned toward the airstrip but was unable to glide to the runway. The pilot selected an emergency landing area that consisted of soft muskeg, brush, and small spruce trees. The airplane came to rest nose down, standing in a near vertical position. The airplane received damage to the landing gear and leading edges of the wings. Examination of the airplane at the accident site and again when the airplane was recovered revealed that fuel was present to the carburetor. Fuel drained from the fuel strainer was free of contaminants. The engine exhibited gear and valve train continuity. Thumb compression was present at each cylinder. Spark was produced at each of the front spark plug leads upon hand rotation of the engine. The spark plugs exhibited a blackened appearance. The engine primer was unlocked.