In theory, yes.
In reality, I think accuracy circles are used really poorly a lot of the time. I see a lot of observations where the accuracy circle probably doesn’t encompass the actual observation, or where the accuracy circle is far larger than it needs to be. For this specific case, I don’t know how many observations there are with very large accuracies where the pin is actually pretty accurate as to the location, but I’m sure there are some. I wouldn’t be surprised if there’s quite a lot.
In particular, as mentioned above, I’m sure there are cases where people have been slightly confused and have used large accuracies as an attempt to obscure coordinates, yet have still placed the point accurately.
Your suggestion appears to be a square with side length of twice the observation accuracy, centered on the observation pin. Maybe I’m misunderstanding, but if not, this will allow anyone to locate the observation pin exactly if they want. In other words you haven’t actually obscured the observation at all.
My suggestion is a square with side length of twice the observation accuracy plus 0.2 degrees, centered on the centre of the normal obscuration rectangle. This will only provide you the same information as any other obscured observation, i.e. the 0.2 degree box the observation pin is found in.