MIS-SET ALTIMETERS ON B737-300 RESULT IN EXACTLY 1000 FOOT ERROR AT LEVELOFF.

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THE ACFT WAS TOWED AWAY FROM THE GATE BY MAINT ON ORIGINATING FLT. WE WAITED FOR THE ACFT OR A REPLACEMENT TO RETURN TO OUR GATE. APPROX 10 MINS PRIOR TO SCHEDULED PUSH; THE ACFT WAS RETURNED TO THE GATE. 4 MECHS; THE GATE AGENT; PROVISIONING; FLT ATTENDANTS; THE CAPT AND I WERE ALL IN THE FLT DECK/JETWAY FOR APPROX 10 MINS. I WENT OUTSIDE TO DO THE WALKAROUND DUE TO BEING UNABLE TO GAIN ACCESS TO THE FLT DECK. UPON MY RETURN; ALL OF THE PREVIOUSLY MENTIONED PERSONS WERE STILL DISCUSSING A PROB CONCERNING EGT WITH THE PLANE. WHEN THE CAPT AND I FINALLY HAD ACCESS TO THE FLT DECK THE GATE AGENT STARTED THE BOARDING PROCESS. MY FLT DECK PREFLT AND FLOWS WERE INTERRUPTED AT LEAST 5 TIMES BY VARIOUS PEOPLE (MECHS; GATE AGENT; FLT ATTENDANTS ASKING QUESTIONS; ETC) I HAD TO STOP AND START MY FLOW 3 TIMES. I FINALLY STARTED OVER FROM THE BEGINNING TO MAKE SURE I HAD NOT MISSED ANYTHING. UPON OBTAINING THE CURRENT ATIS I SET MY ALTIMETER TO THE CORRECT SETTING; NOTING FIELD ELEVATION BY THE RELATIVE POS OF THE ALTIMETER DIAL NEEDLE. IT WAS POINTING AT APPROX 1120 FT -- NORMAL FOR PHX. WE COMPLETED ALL CHKLISTS AND BRIEFING PER STANDARD AND PUSHED FROM THE GATE APPROX 15 MINS LATE. ENG START; TAXI; TKOF AND CLB WERE ALL NORMAL. WE HAD SEVERAL INTERMEDIATE LEVELOFF ALTS ON OUR CLB TO ASSIGNED ALT OF FL280. PHX DEP; NOR ZAB DID NOT COMMENT ABOUT OUR ALT UNTIL WE CHANGED FREQS AND LEVELED OFF AT FL280. AFTER APPROX 2 MINS AT CRUISE THE ZAB CTLR INQUIRED ABOUT OUR ALT. I READ BACK THAT WE WERE LEVEL AT FL280. CTLR SAID THEY WERE SHOWING FL290. UPON LOOKING CLOSELY AT MY ALTIMETER; I NOTICED THAT IT WAS SET TO 28.92! THE CAPT NOTICED THIS AT THE SAME TIME AND BEGAN AN IMMEDIATE DSCNT DOWN 1000 FT WHILE WE BOTH RESET OUR ALTIMETERS TO 29.92. I APOLOGIZED TO THE CTLR. THERE WAS NO TFC IN SIGHT ON TCAS OR VISUALLY. WE PROCEEDED WITHOUT FURTHER INCIDENT. IN MY EXPERIENCE AS A PLT I HAVE NEVER SEEN AN ALTIMETER SETTING OFF BY EXACTLY 1000 FT. UPON MY XCHK OF THE ALTIMETER; I FAILED TO LOOK CLOSELY AT THE READOUT ON THE THOUSANDS WINDOW IN THE FACE OF THE GAUGE; INSTEAD; ASSUMING THAT IT WAS CORRECT DUE TO THE NEEDLE POINTING AT WHAT I THOUGHT WAS FIELD ELEVATION. IT WAS AN EARLY WAKE UP AND SHOW SIGN-IN; A LATE PLANE WITH MAINT ISSUES; WAY TOO MANY DISTRS GOING ON ALL THE WAY UP TO THE PUSH. I WAS RUSHED ON MY FLOWS AND EVEN THOUGH I DID IT TWICE; I STILL MISSED THE ALTIMETER SETTING -- 28.XX LOOKS A LOT LIKE 29.XX. IF THE SETTING HAD BEEN 30.XX I AM SURE WE WOULD HAVE SEEN THE DIFFERENCE. LESSON LEARNED -- BE CAUTIOUS AND CAREFUL. SUSPECT EVERYTHING!