B737-700 Captain inadvertently entered engine out mode of FMC resulting in the aircraft pitching up and throttles retard as assigned altitude was exceeded.

Narrative

This was our first leg of the day. On climbout we were cleared direct ZZZ VOR and climb and maintain 17;000 FT. At approximately 14;000 to 15;000 feet and at 288 KTS I selected VNAV and autothrottles. I noticed that the MASI airspeed bug was at 205 KTS; the climb rate was increasing; and autothrottles were reducing thrust slowly. As my First Officer and I were trying to figure out the situation the Flight Attendants called with a cabin issue; which helped distract my First Officer. When I noticed we were climbing through 17;000 FT I tripped off the autopilot and autothrottles and began a level off and stopped the climb at 17;900 FT. We returned to 17;000 FT. We then found our problem--the FMC was in an ENG OUT climb mode. I don't believe we exceeded 30 KTS ground speed when I did the throttle burst; but possible. I usually don't see ground speeds approaching 30 KTS. Since this was our first flight I don't know how the speed brake was stowed on the last landing. This was the first time I have seen this ENG OUT situation and will certainly recognize it quickly in the future. Besides the routing check; I will also add this to my CDU preflight check