I think the other replies have been on target, but since it seems to have not yet lead to understanding, I'm going to give it a shot from a slightly different angle.
Michael:
what I don't understand is how it's possible to say that a sensation doesn't observe another. If I observe one of my senses with another, then yeah I can see how that observing sense can in turn be observed and so isn't the subject-observing-object itself, but the process of one observing the other is still going on, at least as far as I can tell.
It is worth noting again that a physical sense (hearing, seeing, tasting, touching, smelling) is not capable of perceiving another (I cannot smell things with my eyes). You have recollected that there is a "sense" of observing these physical senses, and I presume it is also capable of observing the subject-self ("inside"). What is that "sense," then? What is this process of one observing the other? What is the "one" and what is "the other?" Is one of the two illusory (can one of them be done away with, is one of them redundant, is one ephemeral / ambiguous and constantly changing, etc)? If one of the two is illusory, what does that mean for your perception of experience? Specifically: is this sense of a process of one which observes the other actually going on, or is it imaginary?
Michael:
Otherwise, how would the physical sense feed their data which they gather to the mind, if mind weren't able to observe them? Maybe this question should lead me to a great realization.
When the mind perceives itself ("apperception") then the one experiencing such will notice that they
are the sensations, rather than the observer of those sensations. Rather than seeing "through" the eyes, one
is the seeing; rather than hearing "through" the ears, one
is the hearing; rather than tasting "through" the mouth, one
is the tasting; rather than smelling "through" the nose, one
is the smelling; rather than feeling "through" the skin, one
is the feeling. That is to say: when the "sense" of observing is eliminated or in abeyance, one will perceive the physical sense feed with scintillating clarity, because one
is the doing of what is happening (rather than being an observer of such a happening).
Try, if you will, to look about the room from the front of your eyes, as if your eyes are gently painting the landscape as they move, as if the seeing will simply happen regardless of whether you do anything specific at the moment. Can this monitor or mouse pad or hand or whatever be seen as it is, directly (unobserved)? Can I allow this moment to live me, perhaps just for a moment?
Michael:
Ah the limitations of the crude conceptual framework that is the semantic jumble of language.
You may want to reconsider thinking of language as a scape-goat for delusion's wiles, as what it enables is your only way to freedom!
Trent