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1) If a wireless client can see AP "A", to which it is associated, at -40dBm and AP "B" on the same Chan. at -70dBm, is "B" seen as co-channel interference by the client and so CCA (Clear Channel Assessment) concludes that the chan. is not free for it to Tx to AP "A" if AP "B" is Tx'ing?

AP "B" traffic would be seen as co-channel interference. The client would wait to transmit using the 802.11 rules.

2) Is it correct to say that the client will work smoothly with AP "A" because the SNR is 30dB? I think this is false - right, because the 'noise' in this case is not random noise but 802.11 traffic which CCA responds to - right?

The reason for choosing -70dBm is that this is a typical Rx'er sensitivity for 54Mbps data rate for various WiFi interfaces.

Wi-Fi is a pretty robust and resilient technology. I've seen it work well in conditions I never expected it to work at all in. Then again, I've seen VoWLAN work poorly in environments where I thought it would work fine. That being said, it's important to understand the environment in which you plan to deploy BEFORE you deploy.

Will the client on AP "A" work well with a 30dB SNR... probably. Will it be affected by traffic on AP "B"... probably. Will advanced solutions such as VoWLAN work flawlessly given the extensive overlap... probably not. You'll likely have to tweak the environment by decreasing power on the APs to reduce the co-channel interference/overlap. You could also prohibit clients from using low data rates (1 and 2mbps for .11b, 6-12mbps for .11g and .11a). This will decrease the range at which clients "see" other radios but you'll need to make sure that doesn't cause problems with legacy equipment that may not fully support that operating mode.

3) Similarly, if AP "A" can hear AP "B" at -70 (still assuming they are on the same channel) will this be seen as co-channel interference and neither AP will Tx while the other one is Tx'ing - right?

Correct.

4) would you think that the AP Tx powers are too high in the above scenario?

Yes, most likely. You might be having to deal with special circumstances that require this environment. Only a good site analysis will prove that.