Why were the Dragon Knights trying to kill the Dragon Torc?
I would assume what they were hoping for is that Noein would no longer be able to attain Haruka and confirm the existence of Shangri La, with the hopeful outcome.  As stated in the show, no one knows what would happen if Haruka was killed.  Any and all futures would be possible, confirming their own dimensions existence and stopping its destruction.

My problem with the 'observer' idea is that she saw Lacryma first, wouldn't that confirm its existence above Shangri La's?