Yes, that's called ADS-B. It's a huge improvement in avoiding collisions. But both planes need to be transmitting their location and vectors. The military plane was running silent.
Why would both planes have to be transmitting? The military plane can read the commercial plane's transponder.
Even if the military aircraft could read the ADS-B from the commercial plane, they were flying with their night vision goggles on. It's very unlikely that they would have seen all the instruments and could very well have missed the display. And since the two aircrafts were flying approximately at right angles to each other, the warning may have been degraded. (I'm not very sure about this point though. Needs confirmation.)
You are assuming military pilots will pay attention enough to unilaterally notice and stay clear without making mistakes. In the Dulles disaster at least, this clearly didn't happen. With transponders on, both aircraft (via TCAS) and the air traffic controllers are able to pay attention and avoid the situation, so much better chance of catching.
Presumably military aircraft have their own ATC? This does seem insane from a civilian perspective, but I'm curious to know the military side of it. Is this totally normal and not something they worry about, or is this as crazy as it seems for everyone involved?
From what I have seen, I believe that both types of aircrafts are controlled by the same ATC. Otherwise, the two ATCs will have to coordinate among themselves to create non intersecting vectors for each aircraft - which sounds needlessly tedious. But the military does have its own ATCs in many areas. They usually separate the airspace into 'civilian corridors' and 'military corridors', each under the control of the respective ATCs. In conflict zones though, the military operates entirely under their own control. The concept of ATC becomes a bit blurred here. The aircrafts are vectored either by ship-based controllers or more frequently by AEW&CS aircrafts. This is what I assume was happening with the tanker in the story. They were near Venezuela and the Curacao ATC had no information about the tanker.