Earlier quoted context omitted.
I’m a native English speaker here and it’s clear to me. I also think it’s somewhat tricky to express it more succinctly without changing the sentence a fair bit. Essentially it means “it must have been the case that, at the moment we’re speaking of, someone was watching her.” Your sentence is slightly different, in that it implies that, in general, someone was watching her during the timeframe we’re talking about, bu…
AH! Ok, I think I distilled it down to something simpler: It seems to be similar to the difference between "I would've been spoken to" vs. "I would've been being spoken to". Is that correct? Ugh, I have to admit it seems technically "correct" after all :-) but with such a painful (and uncommon) sentence structure that it makes you question if it's right...
There are subtleties involved, but the most basic use case is that the former refers to an action that took place before some point in the past (to which the sentence refers), while the latter refers to an action that was still happening at that past point.
[1] https://en.wikipedia.org/wiki/Uses_of_English_verb_forms#Pas...
[2] https://en.wikipedia.org/wiki/Uses_of_English_verb_forms#Pas...