Snarek,
Apology accepted. OK, You are right, U/S transponder should not be in E. I'll come back to that...
Your scenario,
"C421 approaching Cairns from overhead Townsville at 14,500 on Nov 24 2001 with Transponder U/S and having miscalculated a position due to a 50-kt tailwind mistakes Cape Cleveland for Cape Bowling Green and misses a 717 climbing out of Tvl by 50 feet and 100 meters.
So, how would 'C' prevent this???"
C could not have prevented this because there was no transponder, no-one knew he was there, and the pilot didn't think he was in C. The causal factors are:
1. U/S transponder
2. A VCA due to Navigation Error
Given these two causal factors, Class A,C,G,E has no other defences apart from unalerted see and avoid.
Note, though, that in my scenarios, I only had one causal factor - the U/S transponder. No Navigation Error is necessary. The NAS allows for the aircraft to be there. If my scenario had been Class C airspace, then the VFR would have also had to have VCA'd to get anywhere near the jet. The Class C airspace effectively adds a big layer of protection that E doesn't have.
Given just a transponder failure, and no failure of any other kind (eg nav error, ATC failure), Class E allows for such a near miss whilst Class C doesn't. Class C requires more errors before you get to a near miss situation
Your comment on see and avoid is valid, but in all of these scenarios, it would have to be unalerted see and avoid with a fast moving jet - not effective all of the time.
You said that U/S transponder should not be in E. Yes, but how does the VFR pilot know that the transponder is working? The blinking reply light is not a confirmation. The VFR pilot is not required to be in any comms with ATC to verify the mode A and C (even if he did have the freq), and even if he was, if he is not in radar coverage then nobody knows.
So you are right - VFR with U/S transponder should not be in E, but how can the pilot tell if it is U/S to avoid that airspace in the first place?