There are several things you cant see when you join another players plane,the dot target is just 1 of them. As I understand it it has to do with lag or delay do to internet limitaions.
PS: While I agree it would be helpful I dont think it can be done properly.
Thanks for the feedback, Morf. I hope it is something HTC try to implement, as I agree it could be helpful in training.
Strange that lag would affect this, though, as the target seems like something that is "static" (in that it isn't moving independently, and is always positioned relative to you). If lag affected observer mode, it seems like most of the time you wouldn't even be inside their plane. I could see lag perhaps affecting when you see the bullet holes appear, but that isn't crucial, as long as you can see where they hit.
When attached as an observer, I think you should just be seeing the same "video feed" if you will, of what the pilot is seeing. That is of course an amateur interpretation, as I have no idea how it really works. However, IIRC, in Warbirds you could even have your views slaved to the pilots views, so you would see exactly what he saw (view wise). That would be useful also here.
Hopefully someone will come along with an explanation of why the target can't be seen by others (or even as an observer).
Thanks again.

Ryno