That’s because you get a not null-terminated string when separator length is forced to 2.
Always remember to allocate an extra character for the null terminator. For a string of length N you need N+1 characters.
Once you violate this requirement any code that expects null-terminated strings (puts() function included) will run into undefined behavior.
Your best bet is to not force any specific length:
char separator[] = "||";
will allocate an array of exactly the right size.