B767 FLIGHT CREW USES WRONG ALTIMETER SETTING DESCENDING THROUGH TRANSITION LEVEL (29.41 SET WITH ACTUAL SETTING OF 30.41) RESULTING IN ALTIMETER READING 1000 FT HIGH. EGPWS TERRAIN WARNING IS ANNUNCIATED DURING VISUAL ILS AT 900 FT AGL WITH THE AIRCRAFT ON GLIDE SLOPE AND ON THE PAPI. GO AROUND IS INITIATED AND THE ALTIMETER ERROR IS DISCOVERED.

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ON DESCENT THROUGH FL180 THE ALTIMETERS WERE INCORRECTLY SET TO 29.41 INCHES BY BOTH THE PILOT FLYING AND THE PILOT NOT FLYING (CORRECT ALTIMETER WAS 30.41). IT IS UNCLEAR IF ATC ISSUED AN INCORRECT SETTING OR IF BOTH PILOTS MISHEARD THE ALTIMETER SETTING. AS IS ALWAYS MY HABIT WHEN DESCENDING THROUGH FL180; I SET THE ALTIMETER SETTING ISSUED BY ATC AND CONFIRM IT ON THE ACARS SCREEN. IT WAS NIGHT; THE COCKPIT LIGHTING AS WELL AS THE ACARS SCREEN WAS SET TO DIM. DURING THE POSTFLIGHT; IT WAS CONFIRMED THAT 30.41 WAS DISPLAYED ON THE ACARS SCREEN. IN HINDSIGHT; SEEING THAT THE LAST 2 DIGITS ON THE ACARS WERE IN AGREEMENT WITH WHAT WAS SET ON THE ALTIMETERS LULLED ME INTO BELIEVING THE ALTIMETER SETTING HAD BEEN CONFIRMED. A SERIES OF DESCENTS WERE ISSUED BY ATC WITH LEVELOFFS FOR VERY BRIEF PERIODS. DURING THESE BRIEF LEVELOFFS; ATC REQUESTED A DESCENT TO ALTITUDES TO WHICH WE BELIEVED WE WERE CURRENTLY LEVEL. THE PILOT NOT FLYING WOULD RESPOND 'LEVEL.' THIS SHOULD HAVE PROMPTED US TO QUESTION OUR ALTITUDE; BUT BECAUSE THEY THEN ISSUED A FURTHER DESCENT; WE BECAME FOCUSED ON THE NEW CLEARANCE. THE INDICATED ALTITUDE WAS ALWAYS 1;00 FT LOWER THAN THE ACTUAL ALTITUDE. A VISUAL APPROACH WAS ISSUED WITH THE RUNWAY IN SIGHT. I MAINTAINED WHAT I BELIEVED WAS 3000 FT UNTIL PICKING UP THE GLIDE SLOPE. THE AIRCRAFT WAS FULLY CONFIGURED AND STABILIZED ON GLIDE SLOPE AND LOCALIZER BY THE FAF WITH THE RUNWAY AND VASI IN SIGHT. AT ABOUT 900 FT AGL; WE RECEIVED A GPWS WARNING; 'TERRAIN; TERRAIN; PULL UP; PULL UP.' TERRAIN WAS NOT A FACTOR; BUT WE ELECTED TO GO AROUND. THE ATC CLEARANCE WAS TO 'FLY THE RUNWAY HEADING; CLIMB AND MAINTAIN 2000 FT.' CLIMBING THROUGH AN INDICATED ALTITUDE OF 1700 FT; THE ALTIMETER ERROR WAS DISCOVERED AND THE NEW ALTIMETER WAS SET WHICH SPUN THE ALTIMETER UP 1000 FT. COMBINED WITH THE AIRCRAFT RATE OF CLIMB; THIS CAUSED OUR ALTITUDE TO PEAK AT 3300 FT. AT THIS POINT; ATC STATED; 'OK JUST LEVEL OFF AT 3;000 FT;' FOLLOWED BY; 'CONFIRM YOUR ALTITUDE.' WE CORRECTED TO 3000 FT; AND THE AFTER TAKEOFF AND APPROACH DESCENT CHECKLISTS WERE COMPLETED. AN UNEVENTFUL APPROACH WAS CONDUCTED.