A BE35 pilot suffered a NMAC in IMC when he failed to level at 3000 MSL as cleared by approach control.

Narrative

I was told by ATC to descend to 6;000 feet prior to entering the MOA. ZZZ approach descended me to 3;000 feet. My heading was 160. I was told to maintain 3;000 and turn left to 060. I was depending on my autopilot to maintain my altitude and make the turn. The radio transmission from ZZZ was weak and barely audible. I tried to ascertain the problem with the radio by turning the volume up and down; tapping on the radio. (The Air Traffic Manager [later] told me they had played back the tapes and they recognized that their transmissions were weak.) Approach Control said; 'What are you doing? Where are you going? What altitude are you supposed to be at?' I then noticed that my altitude was approx. 2;000 feet. I stopped the descent and asked ATC; 'What do you want me to do?' ATC gave me a left turn to 40 degrees; then a right turn to base leg; and then a right turn to final which is on a heading of 240. I had been cleared to land; but at this point I was too high to land. I told the Tower that I would either have to go around or make a 360 turn to lose altitude. The Tower gave me a 360 degree turn to the right and told me to re enter a base leg. When I completed the turn the Tower said I was not cleared to land. The Tower told me to fly outbound on the right side of the outbound course and make a left turn back on to the final approach course to Runway XX. Then I was cleared to land. When I landed the Tower said to me Possible Deviation and asked me to call them by telephone. By telephone call I was told that I had busted the assigned altitude and had come within 100 feet of a King Air and they would turn the information over to Flight Standard District Office because of a loss of separation. How the problem arose: My auto pilot that was holding altitude apparently disengaged and I didn't hear the warning tone. I was preoccupied with the radio problem. Approach did not notify me of the unauthorized change in altitude until I was at 2200 feet.Ways to prevent this problem in the future:The auto pilot warning sound should be louder. The pilot should scan the instruments even when dealing with other tasks; like checking into a radio problem. ATC should have their transmission equipment working so that their transmissions are clear and loud enough. ATC should have notified me of the unauthorized altitude change sooner.