We hear the stage setting is observed (4)
I believe the answer is:
seen
'is observed' is the definition.
(synonyms)
'we hear the stage setting' is the wordplay.
'we hear the' shows a homophone (sound like).
'stage setting' becomes 'scene' (I've seen this in another clue).
'scene' sounds like 'SEEN'.
(Other definitions for seen that I've seen before include "watched" , "Observed or percieved" , "Spotted" , "Witnessed" , "Viewed" .)