Indeed, your point is well taken; it is precisely this sort of argument that makes the MWI (sorry if you dislike the phrase!) attractive. If we prepare an electron in a superposition of, say, spin-up and spin-down, then it makes good sense to say that the electron eventually interacts with the detector, or detector-plus-human, system. But hang on, how do we know that the detector doesn't then go into a superposition of detecting-up and detecting-down, and the human into a superposition of seeing-the-detector-saying-up and seeing-the-detector-saying-down? Well, we don't experience a superposition, but then we wouldn't; we can only experience one brain state at a time!
Push this argument out to the whole universe and, as you rightly say, there's no further system it can interact with; there's no Final Observer to cause the collapse. (Although I've seen Christians use this as an argument for their god.) So the conclusion seems to be that there is no collapse, there's just the point where the human's wave function splits into two parts and we are consciously aware either of the up or down state. Now, there's one weakness to this: It is really not clear why, if this is the explanation, we should get the Born probabilities.
So, to return to the collapse postulate, one popular theory is that 'observation' means "the system in superposition becomes very massive": In other words, the electron interacts with the detector, and the detector-plus-electron system is in a superposition; but of course the detector is fantastically heavy on the scale of electrons, so this causes the collapse. (Or to put it differently, collapse is a process whose probability per unit time goes asymptotically to one as the mass increases.) In other words, 'observation' is taken as some process which occurs in the unification of QM with GR. This is a bit unsatisfactory in that it doesn't account for the lack of unitarity and what-have-you, but at least it gives a physical interpretation to 'observation'.
Indeed, your point is well taken; it is precisely this sort of argument that makes the MWI (sorry if you dislike the phrase!) attractive.
Yay! The rest of your argument seems sensible, but I'm too giddy to really understand it right now. I'll just ask this: can you point me to a technical paper (Arxiv is fine) where they explain, in detail, exactly how they get a certain electron "in a superposition of, say, spin-up and spin-down"?
In response to falenas108's "Ask an X" thread. I have a PhD in experimental particle physics; I'm currently working as a postdoc at the University of Cincinnati. Ask me anything, as the saying goes.
This is an experiment. There's nothing I like better than talking about what I do; but I usually find that even quite well-informed people don't know enough to ask questions sufficiently specific that I can answer any better than the next guy. What goes through most people's heads when they hear "particle physics" is, judging by experience, string theory. Well, I dunno nuffin' about string theory - at least not any more than the average layman who has read Brian Greene's book. (Admittedly, neither do string theorists.) I'm equally ignorant about quantum gravity, dark energy, quantum computing, and the Higgs boson - in other words, the big theory stuff that shows up in popular-science articles. For that sort of thing you want a theorist, and not just any theorist at that, but one who works specifically on that problem. On the other hand I'm reasonably well informed about production, decay, and mixing of the charm quark and charmed mesons, but who has heard of that? (Well, now you have.) I know a little about CP violation, a bit about detectors, something about reconstructing and simulating events, a fair amount about how we extract signal from background, and quite a lot about fitting distributions in multiple dimensions.