To me, with my current understanding, it does mean just that. The "observer viewpoint" is composed in thought; it creates a subject and objects.
Just to confuse you, I do agree that that is the way it
appears.
To my thinking, the thought process is merely a trickle-down effect from far more direct cognitions of reality. In effect, mental thought is the most superficial layer of cognition, it certainly isn't the only way reality is resolved although, as a race we have certainly excelled in refining that process.