Distracted by a malfunctioning autopilot and led astray by an improperly reset altimeter; the flight crew of a B767 overshot their cleared altitude.

Narrative

The center autopilot was on MEL and deactivated; and we were taking off on 27L at Charles Gaulle airport with the ATREX 1A RNAV SID. After the right turn; approximately and above 1000 AFE; I called for engagement of the right autopilot. We subsequently received an 'autopilot' EICAS; indicating a degraded mode. The aircraft started to veer off track; so I disconnected the right autopilot; hand flew and called for engagement of the left autopilot. Climbing through the transition altitude; I made the appropriate callout; and set my altimeter to 1013HPA. The Captain responded and set hers too. At FL100; the aircraft did not level off until 10300 MSL. I looked over at the Captain's altimeter; which had been set wrong to 992 HPA. The two windows are confusing; and the correct setting was applied; and the aircraft descended back to FL100. Since we only had one autopilot; the left; the left FCC was controlling the aircraft parameters. Departure control queried us as to the high level off; and stated traffic above us 1000 FT off to the right. We corrected very quickly; and proceeded for the remainder of the flight with no further incident. Losing an autopilot at 1200 AFE is a major loss of system redundancy; and since the departure was an RNAV departure; it was required by procedure to engage. This incident provided a great distraction at a critical phase of flight. Also; the improper setting of the altimeter by the pilot monitoring contributed; but if the right autopilot had been operable; this incident would not have happened.