ALTDEV CAUSED BY MISSET ALTIMETER. DISTR CAUSED BY ELT XMITTER MALFUNCTION AND PAX (MECH) SUGGESTIONS.

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UPON DEP VFR FROM ADRIAN; MI; I TUNED TOLEDO ATIS TO OBTAIN THE ALTIMETER SETTING. AS I WAS ENTERING THE PRESSURE SETTING INTO THE ALTIMETER; THE ELT ACTIVATED FOR NO APPARENT REASON. I DISCUSSED WITH THE PAX (OUR FBO'S MECH) THAT WE COULD LAND AND INVESTIGATE. HE SUGGESTED THAT I JUST RESET THE ELT. AFTER MULTIPLE ATTEMPTS I WAS ABLE TO RESET/REARM THE ELT. I THEN CONTACTED TOL APCH AND RECEIVED MY CLRNC DIRECT TO JACKSON AND ALT OF 3000 FT. I CLBED TO 3000 FT AND WAS ADVISED BY TOL TO CONTACT LAN APCH. AFTER CONTACTING LAN AND RPTING IN AT 3000 FT; LAN THEN ASKED ME TO VERIFY AT 3000 FT; WHICH I DID. AT THIS POINT LAN APCH ADVISED ME THAT THE MODE C READOUT INDICATED I WAS AT 2600 FT MSL. AT THIS POINT I REALIZED THAT I NEVER COMPLETED ENTERING THE CURRENT PRESSURE SETTING INTO THE ALTIMETER DUE TO BEING DISTR BY THE ELT. I ENTERED THE CORRECT SETTING SUPPLIED BY LAN APCH; THEN CLBED TO 3000 FT MSL. I ASKED THE CTLR WHAT THE MODE C WAS NOW INDICATING AND HE STATED 2800 FT AND THAT 200 FT ERROR WAS ACCEPTABLE. I SHOULD HAVE LANDED THE PLANE WHILE IN VFR CONDITIONS AND SORTED OUT THE PROB WITH THE ELT ON THE GND. THIS PROBABLY WOULD HAVE PREVENTED ME FROM BECOMING DISTR LATER ON.