Forrest -
I really appreciate the care and intelligence you've put into this essay. I think it's very important to emphasize that "consciousness" refers to a 1st-person viewpoint that's always uniquely located in space and time. And I fully agree that there's no contradiction between this 1st-person viewpoint each of us has and the 3rd-person "objective" mode of imagining the world.
But when you ask, "how does a 1st person experience arise from purely 3rd person reality?" - I think two very different things are getting confounded. This isn't a criticism of your argument, which is quite good - it's a reflection on the intellectual background we're dealing with.
One of these two things is the issue of viewpoint. No conceivable description of objective reality - that is, of reality as conceived from no particular point of view (3rd person) - could give a good account of the world from a particular point of view inside it. But having a particular viewpoint, i.e. being somewhere in space and time, is not a specific feature of conscious beings. Atoms always interact from a specific point of view; and like us humans, any measuring device only has access to the world in a particular place and moment. This hardly means they're "conscious".
The other thing is the issue of the kinds of interaction that take place: this distinguishes atoms from living things, and makes human experience different from the experience of other animals. We can describe the differences between atoms, animals and humans objectively, in terms of externally observable behavior. We can also describe their differences from their respective 1st person viewpoints, where their respective interaction-contexts become important. For example, quantum theory and relativity require us to take the viewpoint / context of "the observer" into account, where any physical measuring device can play the role of "observer". It sometimes makes sense to talk about the "proper frame" of a particle.
What does not make sense, I think, is to treat 1st person "consciousness" as it if were some kind of 3rd person characteristic that some entities objectively "have" and others don't. The "hard problem" arises because subjectivity itself is assume to be objectively real... i.e. something that can be conceived apart from any particular point of view.
In an earlier contest essay (Section 3), I tried to show that the argument about the nature of time, in physics, involves the same confusion. The question of whether the "flow" of time is objectively "real" makes no sense: there can only be a present moment "now" from some point of view in time, just as there can only be a "here" from some particular point of view in space. I argued that relativity itself makes the 1st person aspect of time more fundamental than the 3rd person block universe picture.
The bottom line is that our notion of a "purely 3rd person (objective) reality" is entirely valid, eminently reasonable and profoundly useful, because there are such important aspects of the world that can best be described that way. But there are other equally important aspects of the world - conscious experience being one - that are purposely and necessarily left out of the objective picture. In other words, even in physics, the world is not only an objective reality but also a web of interactions between viewpoints. It's very unfortunate that many people can only seem to grasp the latter by talking about "panpsychism", i.e. again imagining subjectivity as if it were an objective feature of the world that even atoms "have".
When we argue about "free will" vs. "determinism", we're likewise confusing these viewpoints. There are aspect of the physical world that operate deterministically and others that involve statistical constraints on otherwise random events - but this is an entirely 3rd person issue, that has nothing to do with consciousness. From my 1st-person viewpoint, I can't see that my life would be the least bit different if it were proved to me that my brain-dynamics is really strictly causal, and that I therefore don't really "have" free will.
I hope these comments make sense to you... and I'd very much appreciate your looking at my current essay, when you get the chance.
Thanks - Conrad