ACR-MLG ON DEP CLIMB CONFLICTING WITH ACR-MLG ON CONVERGING COURSE RESULTING IN LESS THAN STANDARD SEPARATION.

Narrative

ON CLBOUT FROM RWY 1L AT DULLES; DEP CTL CLRED US DURING CLB TO MAINTAIN 10000'. AT 7200' DEP CTL SAID TO MAINTAIN 7000' AND ASKED OUR ALT. I RESPONDED 7200'; AND CALLBACK WAS TFC AT 11 O'CLOCK; 4 MI; MLG Y AT 8000'; TURN LEFT TO 270 DEGS HDG; MAINTAIN 7000'. I RESPONDED WITH IMMEDIATE ACFT PUSHOVER AT 7300' TO DSND BACK TO 7000' AND A TURN TO 270 DEGS AS WE (F/O AND I) HAD THE TFC IN SIGHT. ATC DID NOT HAVE OUR ALT RPTING AND DURING THIS I SWITCHED TRANSPONDERS TO #2; WHICH LATER CONFIRMED PROPER ALT READOUT. #1 TRANSPONDER WAS APPARENTLY INOP. I THEN LET THE F/O RESUME CTL OF THE ACFT. OUR FLT THEN WAS CLRED ON COURSE. I WAS WONDERING WHY ATC NEVER SAID ANYTHING ON OUR ALT DURING INITIAL CLBOUT; BUT AFTER THIS I DID NOT QUESTION THEM. THE IMMEDIATE LEVEL OFF WAS READILY APPARENT TO THE PAX; BUT IN MY OPINION THERE WAS NOT A NEAR HIT SITUATION AS MLG Y WAS AHEAD OF US PASSING LEFT TO RIGHT AND OUR ALT WAS 700' LOWER AND AT LEAST 2 1/2 MI HORIZ. I HAVE BEEN THROUGH DULLES AREA INFREQUENTLY; BUT I FEEL THE CTLRS THERE ARE NOT VERY SHARP AND ALERT SOMETIMES.