I FLY, I think you will find that the PA31 was PROBABLY IFR OCTA otherwise, unless requested SY RAD wouldn't give a hoot, unless of course it was quiet and He/She just happened to notice the situation.
Saying that, I do agree re RAD helping re seperation but this will not occur when the area controller is flat out. Pilots are easily capable of providing their own seperation. See and avoid and of course proper radio use. That seems to me what you were doing anyway, as you said you saw him half a mile away. If he was on the recprical track then one of you were going down the wrong way, obviously.
One day CASA, ATSB and Airservices will see the light.
OZgrade 3 don't get upset re everyone opposing your opinion, it's only a discussion. From my experience with the BK/CN training areas, from many years ago, it was hell out there trying to look out, provide separation and devote your attention to your student appropriately. There surely must have been more near misses going unreported in the training area then any where in Oz.
I do agree that the NAV is easy up and down the lane however from your instructing experience you should have also noticed how difficult and daunting it is for a new pilot. What's so wrong about making it easier and therefore safer. It wouldn't cost much, apart from some of RIC' unused airspace and the standard brouchures and amendment changes etc, etc. The main points hear are the radio not the nav. However the excursions into controlled airspace need to be addressed.
By the way if the nav is so easy and OZ3 you believe needn't pose a problem, why is it that so many of the 'situations' are caused by BK new PPLers and students. Maybe the instruction is the problem. Just a thought, not an accusation....