POTENTIAL CONFLICT AVERTED WHEN A CLBING DEP B757-200 FLC REVERTS TO VISUAL PRECAUTIONARY AVOIDANCE PROCS IN A LEVEL OFF; WHILE IN CONFLICT WITH THE TCASII RA FOR A CLB WITH DSNDING OPPOSITE DIRECTION TFC AHEAD; S OF DEN; CO.

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WE TOOK OFF ON DEN RWY 17R AND WERE CLBING OUT ON RWY HDG TO 10000 FT (ASSIGNED). PASSING THROUGH APPROX 9200 FT MSL; WE RECEIVED A TCASII TA. WE OBSERVED TFC AT 10 O'CLOCK POS DSNDING THROUGH APPROX 11800 FT MSL. AS WE PASSED APPROX 9500 FT MSL; WE RECEIVED AN 'RA' TO 'CLB; 'CLB' AND AN ASSOCIATED IVSI INSTRUCTION TO CLB. DUE TO OUR LIGHT LOAD; OUR ACFT HAD CAPTURED ALT ABOUT 8500 FT MSL AND WAS IN THE PROCESS OF LEVELING OFF. THE FO WAS HAND FLYING THE ACFT; BUT THE AUTOTHROTTLES WERE RETARDING. WE NOTICED FROM THE TCASII AND VISUALLY THAT THE APCHING ACFT WAS LEVELING OFF AT 11000 FT MSL. WE LEVELED OFF AT 9700 FT MSL. SINCE WE WERE ALREADY IN THE PROCESS OF LEVELING OFF AND THROTTLES ALREADY COMING BACK; OUR LEVEL OFF AT 9700 FT WAS A SMOOTH MANEUVER. THE OTHER ACFT PASSED DIRECTLY OVERHEAD AT 11000 FT MSL. (1300 FT VERT SEPARATION). AFTER THE OTHER ACFT PASSED; WE CONTINUED OUR CLB TO 10000 FT. DENVER DEP CTL POINTED OUT THE TFC SHORTLY AFTER WE RECEIVED THE TCASII RA. FORTUNATELY; THE WX WAS CLR WITH EXCELLENT VISIBILITY. WE COULD SEE THAT THE OTHER ACFT WAS AN ACR ON THE ARR FROM THE SE; AND WE WERE RELATIVELY SURE THAT HE WOULD LEVEL OFF AT 11000 FT. (WE HAD JUST FLOWN THAT SAME ARR A COUPLE OF HRS EARLIER AND WERE FAMILIAR WITH THE ARR). IF THE WX WAS IMC; WE WOULD MOST LIKELY HAVE FOLLOWED THE RA INSTRUCTIONS; WHICH WOULD HAVE LED TO AN ALT BUST AND A POTENTIALLY SERIOUS CONFLICT. I THINK THAT THE RA WAS PROBABLY CAUSED BY OUR EXCELLENT CLB RATE; AND PROBABLY BECAUSE THE OTHER ACFT WAS DSNDING AT A RAPID RATE. HOWEVER; SINCE OUR ACFT CAPTURED ALT AND THROTTLES WERE COMING BACK; OUR CLB RATE WAS LESS THAN 1000 FPM AS WE PASSED THROUGH 9000 FT. THERE MAY BE A FLAW IN THE TCASII SYS IN RARE CIRCUMSTANCES LIKE THE ONE JUST DESCRIBED. ATC COULD HAVE PREVENTED THIS POTENTIALLY DANGEROUS SIT BY VECTORING 1 OR BOTH OF THE ACFT.