Separation as in huge cultural differences between the two halves and maybe some conflicts
The Austro-Hungarian Empire used to be called the "jail of nations". The following nations called it home: Austrians, Czechs, Moravians, Silesians, Slovenes, Hungarians, Romanians, Serbs, Slovaks, Croats (along with Gypsies and Jews). Note, that in the Hungarian part of the Empire, no nation had the majority. A century and half of magyarization has ultimately lead to the dissolution of the Empire after the Great War.
Yes very much. Foreign politics where done as one entitiy, interior politics were seperate and up to each of their parts.
What i realise from history-class, the language, if you went to an federeal agency, was German, so if you were an Hungarian and wanted e.g. to marry at the registry office, you had to speak german there. Of course there were surely other separations between them, but Hungary was "preferred" over the other countries Austria "owned", like Slowenia, Croatia etc. The empire was extremely big back then, don't forget this.