What I expected to happen was...
Observers should still be able to detect updates even when they cross chunk borders
What actually happened was...
Observer didn't detect any block updates at all after crossing a sub-chunk border
Impact
This breaks every vertical flying machine and is not intended behaviour
Additional information
Replacing the observers doesn't work, because the observers still don't detect anything. The only way to fix it is by pushing the observer again. I was able to reproduce this fairly consistently with a 2 way flying machine.
In the video provided, it doesn’t look like the observer is on a subchunk border (the nearest is Y=31 to 32). I wonder if it is something else about the flying machine that causes the stuck observer.