Mode S is not required for TCAS to work. All you need is the direction (azimuth) and the flight level.
A Mode C transponder on the target, with some antennae arranged to give direction finding (like an ADF, or a stormscope) gives you that.
Plus mandatory transponders of course.
The extra functionality of Mode S is for ATC purposes; it allows the interrogating radar to select which targets should respond. There is also a return of an aircraft-specific ID but one wouldn't really need that for TCAS.
What Mode S can give you is another way to implement TCAS, using some sort of data transfer facility. I haven't read up on this.
The best system would simply transmit one's GPS position and GPS altitude. Then, no DF antennae are required and the whole thing could be cheap (sub-£1000 say). Of course by the time the usual avionics vendors and their distribution/dealer/installer chain gets their teeth into it it won't be anything like that. But it doesn't have to cost the 10 grand it does at present.