As much as I would like to agree with you, you cannot read the language "to the extent permitted by law" as referring solely to the "treaty law" (sic). If the drafters wanted that limitation, they would have said, "to the extent provided by this Document" or similar. The phrase "to the extent permitted by law" is a nod to the local laws wherever the election is taking place, so that the observers do not interfere with the process. Guess who decides what "interference is": the local legislature.
It does not make sense to say that the only limitations on the observers arise from the Document itself. Can observers hover over local officials? Can they touch and inspect every ballot? These actions are all regulated by local laws. The 100 foot distance is Texas is asinine, but it's the local law.