Let us not forget that the 500' separation is based on the IFR and VFR pilots being at the correct level. An example of this not being the case:
Inbound to a MBZ the other day. Spoke to a light twin dept the aerodrome in the opposite direction (East) that was on climb to 10,000. Asked if he was IFR (wondering why he had not been given as traffic from Centre).
"No VFR". Asked why he was going to 10,000 when heading east.
"Now on climb 9,000". Said that that was a IFR level and he should be at Odds + 500.
"OK, now on climb 9,500". 
Now just think if he had no radio....
