Why does observational knowledge work in your own possible worlds, but not in counterfactuals?
It does not work in this counterfactual. Omega could have specified the counterfactual such that the observational knowledge in the counterfactual was as usable as that in the 'real' world. (Most obviously by flat out saying it is so.)
The reason we cannot use the knowledge from this particular counterfactual is that we have no knowledge about how the counterfactual was selected. The 99% figure (as far as we know) is not at all relevant to how likely it is that we would be presented with an even or odd counterfactual result. When we intuitively reject the counterfactual result we, or at least I, are making this judgement.
Yes, clearly in some counterfactuals such knowledge works.
The reason we cannot use the knowledge from this particular counterfactual is that we have no knowledge about how the counterfactual was selected.
What do you additionally need to know about the counterfactuals? Where is the ambiguity (among what two examples of possible interpretations that change the analysis)? What do you mean by "selected"?
Consider the following thought experiment ("Counterfactual Calculation"):
Should you write "even" on the counterfactual test sheet, given that you're 99% sure that the answer is "even"?
This thought experiment contrasts "logical knowledge" (the usual kind) and "observational knowledge" (what you get when you look at a calculator display). The kind of knowledge you obtain by observing things is not like the kind of knowledge you obtain by thinking yourself. What is the difference (if there actually is a difference)? Why does observational knowledge work in your own possible worlds, but not in counterfactuals? How much of logical knowledge is like observational knowledge, and what are the conditions of its applicability? Can things that we consider "logical knowledge" fail to apply to some counterfactuals?
(Updateless analysis would say "observational knowledge is not knowledge" or that it's knowledge only in the sense that you should bet a certain way. This doesn't analyze the intuition of knowing the result after looking at a calculator display. There is a very salient sense in which the result becomes known, and the purpose of this thought experiment is to explore some of counterintuitive properties of such knowledge.)