the net effect of client separation is that your device sees no other layer 2 devices on the wlan besides the gateway. this would typically be enforced at the frame level by the APs and is separate from any radio privacy cryptography.
a properly configured wireless setup would assume every client is compromised and would also disallow local client-client via source routing or proxy ARP or any other escape options. 100% secure? probably not, but its a non trivial barrier that would have to be circumvented.
as with e.g. broken WEP years ago, there are still options to mess with clients at ~Layer 1 but I dont believe its currently as trivial as it used to be.