Earlier quoted context omitted.
I could see saying "she'd had to have been watched" or "they had to have been watching her". Both sound very natural to my ear. Observed to me feels more like they're looking at every minute detail with some emotional distance and maybe a feeling of something novel. A scientist observes a rare bug walking on a leaf. A psychiatrist observes his patients' behaviors. It's maybe a more scientific and heavily detail-orien…
“Had to have been kidding” is a relatively common phrase.
"to be ing", "was ing", and "will be *ing" if I remember correctly, are actually thought to be an early borrowing of celtic grammar. Not much celtic anything was adopted into English, but there's a possibility that this sentence structure may be one of the few contributions of the celtic languages that were displaced by germanic Anglo-Saxon languages that eventually formed English.