CAPT OF AN MLG DELAYED DEPT CLB IN RESPONSE TO ATC ADVISORY OF ANOTHER ACFT WHICH HAD HIM IN SIGHT. ATC INTERVENED AND REQUESTED AGAIN FOR RPTR TO CLB IN ADDITION TCASII GAVE WARNING AND INSTRUCTION TO CLB.

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THE CAPT WAS FLYING THE BACK BAY 2 DEP; TRM TRANSITION; THE DEP WAS BEING HAND FLOWN USING VNAV AND LNAV MODES. AT APPROX 5000 FT THE CTLR ADVISED US OF AN EXPERIMENTAL ACFT OFF OF OUR L AT 6000 FT MAINTAINING VISUAL SEPARATION WITH US; THEN WE WERE CLRED HDG DIRECT BHOSE INTXN TO CLB AND MAINTAIN 13000 FT. I RESET THE ALT AND LOOKED DOWN TO REPROGRAM THE FMS DIRECT TO BHOSE. AS I LOOKED BACK UP I NOTICED THE AIRSPD INCREASING AND POINTED IT OUT TO THE CAPT. HE STATED HE WAS GOING TO STAY BELOW THE OTHER ACFT'S ALT UNTIL HE ACQUIRED IT VISUALLY -- WE HAD NO TCASII CONTACT AT THIS POINT. AS OUR RATE OF CLB DECREASED ATC CALLED FOR US TO INCREASE OUR RATE OF CLB. SIMULTANEOUSLY WE RECEIVED A TA FROM THE TCASII; WITH THE TA INFO I ACQUIRED THE ACFT VISUALLY ABOUT 12:30 O'CLOCK AND 1 MI. I ADVISED THE CAPT TO CLB AND ADVISED ATC WE HAD A VISUAL ON THE ACFT AS WE RECEIVED A 'CLB' RA FROM THE TCASII WHILE AT THE SAME ALT. I ESTIMATE CLOSEST DISTANCE AT APPROX 3/4 MI. I SUSPECT A CONTRIBUTING FACTOR IS THE MODE C CODING DIFFICULTIES AT PRESENT WITH ATC COMPUTER PROBS WITH THE 737-500 /V OR /J SUFFIX. I DO NOT THINK ATC WAS RECEIVING ACCURATE MODE C DATA FROM US IN THE CLB AS WE WERE TURNED INTO THE OTHER ACFT. WE ASKED ZAB LATER IF OUR /J HAD BEEN MANUALLY RESET TO /V AND THEY SAID IT HAD NOT. AN ADDITIONAL PROB IS THE LACK OF AN 'ABOVE/BELOW' TCASII DISPLAY OPTION FOR THE CRT EQUIPPED ACFT -- CLBING AND DSNDING ACFT CANNOT VIEW ENOUGH AIRSPACE AHEAD -- ALSO REPROGRAMMING OFF THE DEP PUTS 1 PLT HEAD DOWN WHILE TURNING INTO TFC.