I am sitting quietly trying to see and hear sights and sounds. So I am "observing sights" but am I "observing sounds" or is there another word for "sound" perception?
Learn English – “observe” a “sound” or only a “sight”
word-usage
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In the future, you would do well to clarify the bet such that it can be objectively decided who wins. It may be a bit tricky with regards to something like "blurry sound" but here is a relevant NGram:
Blurry is used; fuzzy is used a lot more. For comparison, here is "muffled sound" vs "fuzzy sound":
The usage of blurry sound in published materials up to 2000 are ridiculously small compared to muffled sound. Post-2000 we can take a look at the straight up Google results which reveal around 9.8k results.
So people certainly use it. But the final blow comes from my local dictionary:
blur - a thing that cannot be seen or heard clearly
It explicitly mentions hearing and their example usage is "the words were a blur."
Actually, "he brightens up a room" or *"he lights up a room"*would most likely include sound since he is not a light source but rather a live, animated presence.
Best Answer
Sound perception = to hear. That said, observe is not restricted to physically seeing.
"He observed the law and was a good citizen." is one example I can think of off the top of my head.
"The first Christians continued to observe the Jewish festivals." is another example I found online.
To answer your question, it is not incorrect to say "I am observing sights and sounds."
Observe has a diverse array of usages and meanings. In the future, check a dictionary or thesaurus and provide your research.