Queen ruled out Observer? (5)
I believe the answer is:
noter
'observer?' is the definition.
(someone noting or observing things)
'queen ruled out' is the wordplay.
I cannot really see how this works, but
'queen' could be 'er' (abbreviation for Elizabeth Regina) and 'er' is found in the answer.
The remaining letters 'not' is a valid word which might be clued in a way I don't understand.
This explanation may well be incorrect...
(Other definitions for noter that I've seen before include "He jots things down" , "One observes" .)