I can pretty much guarantee for you, that no matter what ATC have cleared you for, if there's an ILS there it will be tuned and the system allowed to capture it. It's utterly stupid not to use guidance that is there, irrespective of any clearance. If they were to turn the ILS off then I'd simply use a overlay (GPS) approach. If it's at all possible, the aircraft systems would be used to the maximum.
Well, it's pretty easy if you're actually on the ILS, as you can keep the autopilot engaged. That means more opportunity to look out. But, none of us are any good at actually estimating range to another aircraft, so maintaining a separation standard is more about luck than management. Of course this all falls apart at night, and that's were the problem lies.
Thinking about it, if you were to actually fly the visual approach, without any use of the aircraft systems/aids, then you'd have to have the flight director turned off, and the autopilot disengaged. All of your attention would be cycling between "line up, glide path, speed, power", and you would have pretty much zero ability to go looking around for other aircraft. The 'budget ILS' is a much, much, safer option.
No even holding. Just judging the approach gap.
You need to separate having an ILS available (and tuned) from being on an ILS approach. If Sydney cleared me to do a visual approach on (say) 16R, I would still have the ILS tuned/captured. It changes the separation standard, but it does not preclude using an available aid.
Probably most places.