Does it give me a false sense of security - absolutely not, it does enable me to locate traffic that my eyeball struggles to and makes me feel safer when in the soup.
It overlays on my G1000 MFD so there is no loss of situational awareness.
I still look outside, in fact it speeds up acquisition of traffic so much I have more time to scan the rest of the sky when VFR.
Yes - you can find those who are squawking.
I was flying in the Bristol area and they identified a target (which I'd already seen) but not the 3 microlights in my 12 o'clock
Yes, advise those with transponders to use Mode C, if so equipped, but always bear in mind that the majority of very light aircraft are flying below 3000' and won't be transponding and may not even be radio-equipped. Either that or they may not be on your frequency.
Mk1 eyeball isn't perfect but, in reality, is your only equipment for a lot of flight modes...