Non-physical things have never been observed

This is kind of an interesting statement, because if something is directly observable, is it not, by definition, a physical thing?

There's a bit of ambiguity in some cases between what is and isn't physically existant. Do nation-states physically exist? In a sense, yes, we can say the United States exists, we can go there and point to the land and say, "See, it's right there!" But in another sense, it's made up, it's a social construct, if everyone in the world decided that that land area was not the United States and there's no such country, then I think we'd all agree that it doesn't exist any more. So if the United States is a social and mental construct, then does that mean it doesn't physically exist? But we can observe physical effects on people living in the US, we can see how life expectancy fell when the government botched the COVID response, surely that's evidence that the US is real, right? The model of the US existing is a useful tool for being able to predict physical events.

Is this the same or different from, say, a chair? Well, a chair is a collection of atoms (mostly empty space), but what determines which atoms we designate as being part of the chair? It's based on what's useful, isn't it? If a leg breaks off of the chair, we might still say that it's part of the chair, perhaps because it could be reattached, but if the leg was ground up into sawdust, we'd probably instead say that it used to be part of a chair. We can see then that a chair is really just a grouping of atoms that forms a useful mental construct for humans. If there were no humans, the atoms would still exist in the same arrangement, but would it still be a chair? I think that depends on what thing is observing it and whether it finds it useful to group those atoms in the same way. Chairs are a social construct, don't @ me.

So rather than interpreting dualism as some sort of semi-physical ghost riding around with a body, isn't it possible to interpret it as consciousness being a useful enough construct that it can be said to exist as a separate thing? And while yes, we can observe how changes in the physical world (like hunger) lead to changes in consciousness, we can also see how changes in the mental world can influence the physical (changes in blood pressure based on what you're thinking about for example).

Futhermore, we can argue that consciousness emerges from the physical world, but we could also argue that the physical world emerges from consciousness. Our understanding of the physical world is fundamentally rooted in our senses, and if we were cut off from our senses, then we would have no means of understanding or interacting with it. It could be said that the world we interact with is really more of a world of concepts, and our bodies can be observed to alter what we sense to make more sense to use before we actually experience it, the difference between sensation and perception. And so what even is the physical world? The world of atoms? But aren't atoms just models that help us to navigate and understand the world that we actually interact with? Earlier, I said that when we refer to a chair, we are grouping together a certain arrangement of atoms, creating a concept out of the physical. But in reality, don't we start with the chair, and then study it's properties to learn more about the concept that we already created? I don't know that there's an objective answer to that, of which is more "real" and what "emerges" from what - it seems like it's a matter of perspective.

I don't necessarily agree with dualism and idk if my line of thinking is compatible with it or not but I'm not sure that a strict physicalist approach is objectively compelling.

Non-physical things have never been observed, so how would it fit into any explanation of anything?

Well if you can entertain the idea that non-physical things might exist then you're observing a non-physical thing at every point of your existence, your own consciousness. What better candidate for the non-physical than consciousness itself?