AT 1710:53 EST, THE LCL TWR CTLR (LC) AT THE NEWARK INTL ARPT CLRD CONTINENTAL FLT 321 (DC-9-82, N806NY) FOR TAKEOFF ON RWY 22L; 11 SEC LATER, CONTINENTAL FLT 688 (BOEING 727, N577PE) RPRTD 'LEFT DOWNWIND FOR RWY 29.' LC TOLD FLT 688 TO 'MAINTAIN 1500 AS YOU CROSS OVER THE FIELD.' RWY 22L (9300' LONG) WAS LOCATED SOUTH OF RWY 29; THUS, THE LEFT DOWNWIND FOR RWY 29 WAS NR THE DEP END OF THE 22L. AT 1712:12, LC TOLD FLT 321 THAT FLT 688 WAS PASSING 'OVERHEAD & BEHIND YOU AT 1800' . . .' AT ABOUT THAT TIME, THE CREW OF FLT 321 NOTED THEY WERE CLBG THRU 1000' WHEN THEY SAW FLT 688 PASSING DIRECTLY OVERHEAD. THE CAPT OF FLT 688 SAW FLT 321 TAKING OFF & ESTD THE SEPN REMAINED IN EXCESS OF 1000', BUT THE CAPT OF FLT 321 WAS CONCERNED ABOUT THE CLOSE PROXIMITY & CALLED THE TWR AFTER LNDG. RADAR DATA SHOWED THE PLANES PASSED WITHAPRX 400' VERTICAL & 1000' LATERAL SEPN, APRX 1/4 MI SOUTH OF THE ARPT. BOTH FLTS WERE OPERG ON IFR FLT PLANS. LC DID NOT ADZ EITHER FLT CREW OF THEIR TRAFFIC UNTIL 1712:12, MOMENTS BFR THEIR FLT PATHS CROSSED. THE ARPT HAD HVY TRAFFIC.