ALTDEV ALT OVERSHOT IN DSCNT.

Narrative

WE WERE CLRED FROM FL190 TO 17000 FT. WE DSNDED THROUGH 17000 TO 16700 FT WHEN THE ACFT LEVELED AND STARTED BACK UP TO 17000 FT. AT THAT SAME TIME WE HAD AN ALT ALERT; A TCASII TA AND A CALL FROM CTR ASKING OUR ALT. WE RPTED 16900 TO LEVEL AT 17000. THE TCASII INDICATED A CONTACT 800 FT LOW; 8 MI AND AT 10 O'CLOCK. WE WERE BACK AT 17000 WHEN THE TFC AT 16000 PASSED ABOUT 5 MI BEHIND US. THE ONLY THING THAT I CAN ATTRIBUTE THIS TO IS WHEN I CHANGED THE ALTIMETERS TO 29.54 FROM 29.92 IT WASN'T QUICK ENOUGH. I'M SURE I WAS MAKING THE CHANGE AS WE WERE GOING THROUGH FL180. WHEN CLRED TO AN ALT ONLY 1000 FT BELOW THE TRANSITION ALT YOU HAVE TO BE VERY ALERT TO THIS POTENTIAL PROBLEM. SUPPLEMENTAL INFO FROM ACN 204331: THERE WAS NO CONFLICT AND THERE WAS NO RA. IT IS POSSIBLE THE #3 ALTIMETER WAS RESET AFTER THE FMC WAS WITHIN THE CAPTURE MODE (APPROX 1000 FT) OF LEVEL OFF ALT AND COMPUTED LEVEL OFF AT 17000 WITH 29.92 INSTEAD OF 29.59 THAT WAS PUT IN AT FL180. I NOW BELIEVE IT WOULD BE BETTER TO SET THE ALTIMETER FIRST THEN SET THE ALT AND INITIATE AUTO DSCNT SECOND.