Subject-object reversal is one of those practices that works at every level. I think what you’re describing in “stepping back” from the situation is not yet subject-object reversal, for the reason you suggest: there is still an observer.
But it points toward a way of doing the exercise that I find helpful, which is something like reversing figure and ground. That is, you can take yourself to be part of the given situation, like a subject-setting reversal, if you like. This leads toward an experience that I think is characteristic of subject-object reversal when it “clicks” (even if only for a moment); namely, the absence of judgments and reactions to the experience. This follows from the fact that in subject-object reversal, knowledge is not owned by a self, so who is there to comment, and toward what end?
Jack