A DSNDING B727 FAILS TO MAKE AN ALT XING RESTR WHEN HIS ALTIMETER IS SET AT TOO HIGH A READING IN INCHES. HE PERFORMS HIS APCH TO IAH WITH THIS MISSET ALTIMETER AND BECOMES VISUAL AT 300 FT AGL; EXPECTING TO BE AT OR NEAR 700-800 FT. ATC HAD NOT ALERTED HIM TO ANY ALTDEVS.

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DSCNT WITH XING RESTR; CROSS GLAND AT 10000 FT AND 250 KTS. SO OBTAINED ATIS 30 MINS OUT. HE STATED THE RECEPTION WAS VERY BAD ON HIS COM (BOTH ATIS AND COMPANY). PASSING FL180 I RESET MY ALTIMETER TO 30.38 AND READ THIS BACK TO THE FO. FO CORRECTED ME AND STATED THE ALTIMETER WAS 30.28. WE CONFIRMED THIS ON BOTH IN-RANGE CHKLIST; COMPLETED AT FL180; AND APCH CHKLIST; COMPLETED ON INTERCEPT HDG TO FINAL. ON FINAL AT 1600 FT AGL; MY LOC AND GS BECAME VERY SENSITIVE. AT 1000 FT CALL MY LOC AND GS WAS MUCH TOO SENSITIVE FOR 1000 FT. WE ALSO ENCOUNTERED A WINDSHEAR WITH LOSS OF 15 KTS AND THIS; I THOUGHT; WAS THE REASON FOR GS DEV. WE BROKE OUT AT 700 FT INDICATED ALT. WE WERE ACTUALLY AT 300 FT. LNDG WAS MADE SUCCESSFULLY. TOUCHDOWN ZONE IS 98 FT; OUR ALTIMETER READ 600 FT; ACTUAL ALTIMETER SETTING WAS 29.69. THE ALTIMETER SETTING THAT WAS GIVEN ME WAS READ OFF AN OLD ATIS CARD (DEP STN) 30.28. THIS COULD HAVE BEEN A DISASTER DUE TO THE FACT THAT THE OLD ATIS CARD WAS NOT DISCARDED. IT WILL BE FROM NOW ON. I ALSO CONTRIBUTE SOME CONFUSION TO TURB AND DODGING TSTMS. ON ALL LEVELOFF ALTS WE WERE 500 FT LOW. ATC NEVER QUESTIONED OUR ALT; OR ANY INTERIM LEVELOFF.