In the end I had only 6 damage remaining, not sure if I would have been wounded or is damage only counted when the card if chosen face up fully resolves
I think that is correct- only if the damage "sticks" does it count against you.
I have two investigators that have the same number for the same stat(each have 3 for observation) one of those investigators has a card that allows them to add 1 die to observation rolls. It asks to choose the investigator that has the lowest observation. Can I choose the one that allows him to add a die? Not sure if adding the die actually changes his stat or just makes him better at testing.
This is a tie case, and you can choose. If the game wanted the character to be better at observation, it just would have increased the stat by one I'd imagine Plus you only get to use that ability once per round