A C750 CAPT ADMITTED THAT HE IMPROPERLY PROGRAMMED HIS AUTOMATION; AGAINST THE ADVICE OF HIS FO; CAUSING AN ALT HDG DEV WHEN FLYING THE TEB SID.

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DEPARTING TEB ON TEB 5 SID. SID REQUIRES ACFT TO MAINTAIN 1500 FT MSL UNTIL PASSING TEB DME 4.5 MI FIX THEN ALLOWS A CLB TO 2000 FT. OVERHEAD ARR PATH TO EWR ARPT REQUIRES ACFT DEPARTING TEB TO REMAIN AT THE PUBLISHED ALTS (1500 FT AND THEN 2000 FT) UNTIL CLRED TO A HIGHER ALT BY ATC. THE ALT ALERTER WAS SET TO 2000 FT INSTEAD OF 1500 FT. THE FLT DIRECTOR COMMAND AND ALT ALERTER WARNING WERE PROGRAMMED FOR 2000 FT INSTEAD OF 1500 FT. AS WE APCHED 1500 FT; INSTEAD OF LEVELING OFF FIRST; WE BEGAN OUR TURN TO 280 DEGS PER THE SID. WE MAINTAINED LESS THAN 200 KTS BEING BELOW CLASS B AIRSPACE. THE ATTN PAID TO THE HDG CHANGE OF 40 DEGS AND THE SPEED CTL ALLOWED US TO CLB TO 1740 FT MSL. THE ACFT WAS BEING HAND FLOWN. ATC AND THE FO BOTH ADVISED OF THE 1500 FT REQUIREMENT. WE IMMEDIATELY RETURNED TO 1500 FT UNTIL PASSING THE APPROPRIATE CLB POINT WHICH WAS THE TEB 4.5 DME FIX. THE CLB FROM 1500 FT TO 1740 FT OCCURRED BETWEEN THE 3.9 AND 4.4 MILE DISTANCE FROM THE TEB VOR. WE HAD CAREFULLY BRIEFED THE DEP AND THE FO SUGGESTED THE ALERTER BE SET TO 1500 FT INSTEAD OF 2000 FT. HAVING FLOWN THE DEP MANY TIMES; I FELT 2000 FT WAS SATISFACTORY. (HOW WRONG I WAS.) OUR SOP'S WERE PROPER; THE EXECUTION OF THEM WAS LESS SO. WE HAD NOT BEEN RUSHED; NOR WAS WEATHER A FACTOR. IN RETROSPECT; I FAILED TO FOLLOW A LONG HELD BELIEF THAT THE ALT ALERTER IS A STOP SIGN AND SHOULD BE USED IN JUST THAT WAY. BEING FAMILIAR WITH THE ACFT; THE ARPT AND THE DEP LET ME FALL INTO A POOR SIT AWARENESS MODE. THROUGH THE EFFORTS OF MY FO AND ATC; WE WERE ABLE TO MINIMIZE THE ALT EXCURSION. CLEARLY THE LESSON LEARNED IS THAT FAMILIARITY AND A PROB FREE ENVIRONMENT ARE NO GUARANTEE THAT MISTAKES WILL NOT STILL HAPPEN. THE ALERTER IS A STOP SIGN AND AN EARLY WARNING DEVICE. I WAS TRULY HUMBLED BY THE EXPERIENCE.