The theory of the preroughening transition of an unreconstructed surface, and the ensuing disordered flat (DOF) phase, is formulated in terms of interacting steps. Finite terraces play a crucial role in the formulation. We start by mapping the statistical mechanics of interacting (up and down) steps onto the quantum mechanics of two species of one-dimensional hard-core bosons. The effect of finite terraces translates into a number-nonconserving term in the boson Hamiltonian, which does not allow a description in terms of fermions, but leads to a two-chain spin problem. The Heisenberg spin-1 chain is recovered as a special limiting case. The global phase diagram is rich. We find the DOF phase is stabilized by short-range repulsions of like steps. On-site repulsion of up-down steps is essential in producing a DOF phase, whereas an off-site attraction between them is favorable but not required. Step-step correlation functions and terrace width distributions can be directly calculated with this method.