I don't think separating them is a good idea, only because eventually they will have to be together or you will spending lots of time rotating them. The older dog will correct the puppy, when the puppy figures out he's being corrected he will back off. For now you should supervise them to make sure no one is getting hurt, take them for walks together, do some obedience together, etc. This way they are doing good things together. It can work. You don't want the GSD to eat the little dog when he gets older and bigger.
Misty- Samoyed Mix, Tannor- Golden Retriever CGC
Robyn- GSD CGC, TC, Midnite-GSD CGC,TC, Brennan-Golden Retriever CGC, Batman-Husky/Greyhound , Apollo-GSD