It is rare that we see so many mistakes (IMHO) on a single flight.
1. The clearance given to the pilots was incomplete. And this led to a misunderstanding about the FL. Normally, when a controler gives you clearance (in Portuguese), he starts giving you the destination and then the "details". So when the pilots got the FL (370) information, right after the destination (Manaus) and no other word on changing FLs, they read back FL 370 to Manaus and were not corrected.
The other instructions were related to the departure procedure, and that was understood.
2. The pilots did not familiarise themselves enough with the route to question the incomplete clearance. IMO, the pilots should have questioned the non standard FL for that specific airway. Allow me a simple analogy: You are on an interstate hwy, I-40, going west. Between Flagstaff and Wiliams there was an accident and the the traffic had to be deviated to momentarily accommodate westbound traffic in the "wrong" side of the road, facing (controlled) eastbound traffic. If the highway patrol (controllers) authorise you to go all the way to Los Angeles on I-40 east, something must be wrong. I would not question if I didn't know that I-40 was not a 2-way road.
3- The controller in Brasilia did not "remind" the pilots to change FLs. He probably thought the pilots knew what to do, and the pilot expected the controller to tell him what to do.
4- The pilots were not familiar with the Legacy avionics. It is too much of a coincidence that the transponder went off (or stand by) when the pilots were changing radio frequencies, and it's clear (per CVR) that they both were confused about operating the avionics.
5- The controllers did not notice the transponder was off.
6- The pilots, facing communication problems (not radio problems), did not try to call other traffic to try a "bridge" with Brasilia (or Manaus). They only did that after the collision, whith success. At that point, the transponder started transmitting again.
I am against criminal prosecution for these pilots and controllers. Maybe loose their licences, IF it is proven "reckless flying" and "reckless controlling" was the cause for the midair collision. Note I said IF...