I can however confirm that it 'should' work. I have it running at work and it merrily observes the server, all the PCs and the (cheap consumer grade) modem/router.

So I imagine that it is most likely something specific to your network or hardware. Out of interest I did a quick google and could't find much. Perhas you should double check your config (no doubt they have s wiki or someother docs) and/or post on the Observium mailing list/forums (they should have one or the other, or perhaps both - although if they do, pick just one to post on...).