“The FSDO conducts an annual observation for each DPE but that accomplishes nothing since DPE behavior is calibrated to match the inspector’s expectations.”
Which at least in the case of one FSDO I know of, it pretty much means an automatic unsatisfactory. That hardly has the intended effect of ensuring that DPEs are testing properly.
Perhaps what is needed is an independent review board. Either for reviewing DPEs on a regular, unscheduled basis, and/or for reviewing cases where the FAA claims a DPE or pilot is not qualified.