Why did physicists start using the word “real” and “realism”? It’s a philosophical term, not a physical one, and it leads to a lot of confusion. “Local” has a clear physical meaning, “realism” gets confusing. I have seen some papers that use “realism” in a way that has a clear physical definition, such as one I came across defined it in terms of a hidden variable theory. Yet, I also saw a paper coauthored by the great Anton Zeilinger that speaks of “local realism,” but very explicitly uses “realism” with its philosophical meaning, that there is an objective reality independent of the observer, which to me it is absurd to pretend that physics in any way calls this into account.

If you read John Bell’s original paper “On the Einstein Podolsky Rosen Paradox,” he never once use the term “realism.” The only time I have seen “real” used at all in this early discourse is in the original EPR paper, but this was merely a “criterion” (meaning a minimum but not sufficient condition) for what would constitute a theory that is a complete description of reality. Einstein/Podolsky/Rosen in no way presented this as a definition of “reality” or a kind of “realism.”

Indeed, even using the term “realism” on its own is ambiguous, as there are many kinds of “realisms” in the literature. The phrase “local realism” on its own is bound to lead to confusion, and it does, because I pointed out, even in the published literature physicists do not always use “realism” consistently. If you are going to talk about “realism,” you need to preface it to be clear what kind of realism you are specifically talking about.

If the reason physicists started to talk about “realism” is because they specifically are referring to something that includes the EPR criterion, then they should call it “EPR realism” or something like that. Just saying “realism” is so absurdly ridiculous it is almost as if they are intentionally trying to cause confusion. I don’t really blame anyone who gets confused on this because like I said if you even read the literature there is not even consistent usage in the peer-reviewed papers.

The phrase “observer-dependence” is also very popular in the published literature. So, while I am not disagreeing with you that “observation” is just an interaction, this is actually a rather uncommon position known as relational quantum mechanics.