It occurred to me that I have no idea what people mean by the word "observer". Rather, I don't know if a solid reductionist definition for observation exists. The best I can come up with is "an optimization process that models its environment". This is vague enough to include everything we associate with the word, but it would also include non-conscious systems. Is that okay? I don't really know.
It occurs to me, reading your post, that I have almost no idea what people mean by "conscious system". I'm quite certain I am one, and I regularly experience other people apparently claiming to belong to that set too. I suspect that if we can nail down what it means to belong to the set of "conscious systems", we'll be much more readily able to determine if not being a member of that set disqualifies a thing from being an "observer".
If it's worth saying, but not worth its own post (even in Discussion), then it goes here.