Hello @AdamFinney
Thank you for contacting the Canvas Community. We're sorry to hear you've been experiencing issues with SSO for observer accounts on the app. Thank you for explaining in detail what you need. You have taken the right steps, but there isn't a way for you to disable a feature on the admin side of things so that observer accounts are logged out specifically on the app. You will need to speak with your CSM directly to set up something like this.
Because of the complexity of the issue, and the concerns for privacy, it would be best if you contacted Canvas Support directly to pinpoint the source of the issue and provide a resolution. They can forward the case to the CSM on your behalf.
https://community.canvaslms.com/t5/Canvas-Basics-Guide/How-do-I-contact-Canvas-Support/ta-p/389767