Why is it “we” and not “us”? Isn’t this like the slogan “Us Tareyton smokers would rather fight than switch”? (That should date you if you remember that one.)
Well, “[x] students are behaving” is a subordinate clause (It’s a noun clause acting as the direct object of “observe”) and clauses have subjects. The subject is “x students.”
Why two words for the subject? It’s called an appositive. Examples: Blacksmith Bob, Farmer Jones, Bill the salesman. You could remove either word from the phrase and you’d have essentially the same meaning.
“We” is for subjects, and “us” is for objects, so there you have it.
And get rid of those Tareytons.