I feel your pain.
We have a small company with about 20 Macs. The employees are notified that these are company machines and we may from time to time monitor them and we have it stated in our company handbook etc. From time to time, management may have an employee they feel is misusing company resources and they need to be able to view someone's screen without the person knowing. It's extremely rare, but sometimes it is necessary and an employer does have that right.
The "show when being observed" checkbox in the Settings->Sharing->Remote Management->Allow Access... Options List that you posted did hide the observer note when unchecked in El Capitan and previous versions of OS X.
In Big Sur, the checkbox was there, but it seemed like regardless of whether it was checked or not the "Your Screen is Being Observed" still popped up.
After upgrading to Monterey, the "Show when being observed" checkbox has been removed and now the new macs show the message on the login screen when we remote in and it will show a pop-up on the top menu bar when an admin remotes in while the client is logged in. Personally I like the user to know when I am remoting in so they understand why their cursor is jumping around on the screen and they know when I am done. But there are valid reasons for hiding this in a company setting.
I haven't found any way of disabling this and Google seems to concur.
It would be fine if these were owner owned devices, I applaud Apple's efforts to ensure privacy. However these are enterprise machines owned by a company and the option to toggle the message on and off should be the prerogative of the actual owner of the device IMO.