THE C-172 HAD BEEN CLEARED FOR AN OVERHEAD APPROACH TO ENTER A RIGHT DOWNWIND. THE PLT REPORTED OVERHEAD & ROGERED THAT HE SAW THE TRAFFIC COMING UP ON MIDFIELD. HE ALSO OKAYED THAT HE COULD FOLLOW THE TRAFFIC. HE WAS THEN INSTRUCTED TO START HIS RIGHT TURN. THE TOWER THEN TRANSMITTED TO THE C-150 ON DOWNWIND "ON THE DOWNWIND WATCH THE TRAFFIC COMING IN FROM OVERHEAD SIR." THE C-150 & C-172 THEN COLLIDED. THE C-150 HAD BEEN PERFORMING TOUCH & GO LANDINGS. AFTER HIS THIRD DEPARTURE HE CLIMBED TO 700 FT, MADE A RIGHT 90 DEG TURN & CLIMBED TO 1,200 FT. THE ACFT WAS LEVELED & A RIGHT 90 DEG TURN TO DOWNWIND WAS MADE. THE COLLISION OCCURRED AS THE ACFT ROLLED OUT. PUBLISHED TOWER CLIMB-OUT INSTRUCTIONS FOR RWY 22 IS A 20 DEG RIGHT TURN AS SOON AS PRACTICABLE, CLIMB TO 1,000 FT MSL BEFORE ANY FURTHER TURNS. OF THE THREE CONTROLLERS IN THE TOWER, TWO WERE NOT FACILITY-RATED & WERE IN TRAINING. THE TRAFFIC PATTERN WAS CONGESTED WITH ACFT IN CLOSED PATTERNS.