This page: https://secure.phabricator.com/book/phabricator/article/diffusion_existing/

Once the import completes, disable the Observe URI to automatically convert it into a hosted repository.

That's actually incorrect. Disabling the Observe URI doesn't automatically promote any of the other URIs to Read/Write, so the repo is still considered observed. See screenshot:

Furthermore, just disabling the URI doesn't make it possible to promote the other URIs to Read/Write by hand, because you get the following error:

Putting the observing URI in "No I/O" mode is what's actually needed to make Phabricator considered the repo to be hosted, and automatically promotes the other URIs to Read/Write. If this is the intended behavior, the docs should be updated to say

Once the import completes, change the "I/O Type" on the Observe URI to "No I/O" mode to automatically convert it into a hosted repository.