I only ever used Observe to get out of a "poor" jam. If the item's level is low, it won't matter. But high level stuff it matters a lot to eat a poor condition quality touch. It's extremely rare to get yourself into the situation, but still worth having observe somewhere on your bar. It's far too iffy to rely on for higher conditions though, starting at normal. And never use it on good because it'll just go straight down to normal...