  Microlensing event MACHO 97-SMC-1 is one of the rare microlensing events for
which the source is a variable star, simply because most variable stars are
systematically eliminated from microlensing studies. Using observational data
for this event, we show that the intrinsic variability of a microlensed star is
a powerful tool to constrain the nature of the lens by breaking the degeneracy
between the microlens parallax and the blended light. We also present a
statistical test for discriminating the location of the lens based on the
\chi^2 contours of the vector \Lambda, the inverse of the projected velocity.
We find that while SMC self lensing is somewhat favored over halo lensing,
neither location can be ruled out with good confidence.
