1- Should the "Set display mode" give out different output?
Not yet.
VCF visualization is new to Galaxy, and mode switching isn't implemented yet. (It will be implemented in the next release.) What you're seeing is the display of individual variants; of course, trying to view so many variants leads to the mismash that you noted.
If you zoom in sufficiently, you should see variants without trouble. See the attached screenshot for example.
2- What might be the issue if all I see are the same output or maybe the output displayed is totally incorrect? Might there be some trackster setup that I might be missing for it to draw incorrectly?
Everything looks OK so far. FYI, I've created a new page that lists the steps for setting up visualization for a Galaxy instance and updated wiki links/text to point to this page: