1. Do you see his altitude on your primary return on the radar?
No, primary returns would show just an indication of something at that location, no altitude or code.
2. If you don't see altitude, are you relying on the mode C return solely for altitude? Because a mode C return can obviously be altered and be incorrect - I've many times flown with them being well off or have the wrong pressure altitude input.
There are verified and unverified levels. Verification is done by ATC over VHF or i believe can be done on take off roll if it shows the level of the aerodrome. The verified level has to be within 200ft. If not it is to be checked (pressure setting) and re verified. If it is still wrong you will be asked to stop squawking mode C and report all your levels verbally.
Vertical separation can only be applied using mode C on verified levels.
Traffic parameters are 2000ft if the level is unverified. So even if you had a unverfied VFR showing 1900ft difference in levels, traffic would still be passed.
This is a little bit unusual however, any aircraft in that situation should have a clearance, so either will have verified level information or be reporting levels. If this was a class E issue, it would be a completely different story.
However, if they have busted CTA are you still required to separated? Honestly I'm not too sure if you had to, cant remember anything in the books about it, I know I would still separate, as they do in the video.
However you can't use the mode c for separating vertically even if it is showing, as it is unverified. So they could have 6000ft vertically but not technically have a standard.
Do you still turn them with 6000ft? 4000ft? 2000ft?
Edit: Should add, its a situation that applies more to approach controllers, as CTA goes down to the ground near aerodromes, and further out you would have class E/G beneath. In that situation, a paint without mode C can be assumed to be OCTA/traffic issues. If they had mode C inside CTA, again, do you seperate with x ft between them.