Sorry if I'm repeating myself. I just addressed that point, 2D objects in Touhou can hit people and things as demonstrated by Yukari's only 'feat' (which is a vague feat in and of itself) of using this technique. Either the 2D object that travels along the border of the screen can still hit people or it's not a 2D object, which calls into question her ability to manipulate 2D and 3D in the first place.
Terumi has survived being erased from existence on two circumstances, one where he revived himself from Hakumen's time killer (something that destroys all the time you possess, an ability of the Susano'o Unit, this kills you off in the entire timeline and erases you from memory) and one where he was being reduced to the primordial state of sethir along with the entire universe in a massive event. He used Eye of the Azure to nullify this rewriting of the universe on himself, and using this observer, capable of telling Amaterasu off, he most likely returned to full power. As per the mechanics of observation, you have to observe yourself or you will cease to exist. In order for Terumi to use Eye of the Azure he has to constantly observe himself using one of the 3 strongest observer powers to ever exist. He got the Eye of the Azure from Noel Vermillion (who is low 2-C via hax in her last key) and should be capable of using it to affirm his own existence in the least. This means he forces himself into existence constantly with comparable power to things that can straight up create new timelines or reset the entire timeline, no-sell the erasure of everything in the universe and returning to sethir/magical element which is basically just information, the Eye of the Azure can affect Amaterasu via observation and send it out of the boundary.
In order to actually defeat Eye of the Azure, Power of Order had to be used, an ability that scales to counteract the chaos in ther world. Susano'o was basically peak chaos, and the way to counteract it was to use Power of Order to observe Terumi instead of Susano'o, then they attacked his soul with conceptual level soul manipulation (Ragna) and he still didn't die. It should also be mentioned that Noel handled Hakumen's attacks without serious damage due to this same ability back in Continuum Shift.
Susano'o's immortality via observation isn't standard immortality, it's rooted in reality warping and is plenty of bullshit since he can keep it up past being erased from existence as demonstrated against Hakumen. Really, his immortality is far more similar to something like SCP-682, except it's affirmed by a weaker low 2-C level power instead of 1-B and it affirms his existence instead of preventing him from dying.
The fight should be easily predictable for Terumi because he can observe the possibilities of the fight, back in Continuum Shift he observed every single possibility of the (drum roll) continuum shift and became precognitive to some extent. This time the fight is happening in a void with only 2 actors, rather than several hundred with cities and such to be taken into account.
Furthermore, an observer can alter the timeline by observing possible events that can occur, thus making them exist. This is how Takamagahara kept the loops relatively different, with some interference from resistant actors too, until Terumi (who was partially immune to their phenomenon intervention) got the anti-observer armanent and prevented them from acting. By factor of having an observer power, he might be capable of doing similar things. This is reasoned conjecture however.
