"By the way, why is no one answering the original post? That is, how would an air traffic controller handle a VFR aircraft at Albury in the circumstances quoted? "
The scenario given was a VFR transitting Albury from west to east at 7500, plus an IFR inbound to Albury from the south.
The VFR might be asked to 'report overhead'.
The IFR would be given descent with a requirement to be at or below 6500 by 10 DME Albury.
BTW, radar separation is either 3 miles or 5 miles, depending on the capability of the radar. In rare circumstances I recall, it could be 1 mile, eg using RAAF PAR, but that was long ago and I could be wrong. I am fairly sure it cannot be "less than 1 mile'.
There are many means of separation and many separation standards (the two are not the same thing) which is why the manual is so large.