Brain-computer interfaces (BCIs) based on limb motor imagery (MI) have successfully enabled assistive control for individuals with motor impairments. However, decoding complex locomotion intentions, specifically forward movement and turning, remains a significant challenge due to less localized cortical activation and higher inter-individual variability. This study investigated whether combining action observation with motor imagery (AOMI) in virtual reality enhances neural decoding of these navigation intentions compared to MI alone. Nine participants performed MI and AOMI of Forward movement, Left turning, and Right turning while 64-channel EEG was recorded. Event-related spectral perturbation (ERSP) analysis revealed that forward movement elicited significant event-related desynchronization (ERD) in delta, theta, alpha, and beta bands over occipital and parieto-occipital regions, with AOMI producing more widespread and statistically robust ERD than MI. Turning tasks, however, showed bilateral parietal ERD without the lateralized differentiation typical of limb motor imagery. Despite these similar spectral profiles, classification performance differed significantly. For binary classification (standing vs. forward), AOMI achieved 79.8 ± 7.9% accuracy compared to 75.4 ± 8.5% for MI (p = 0.025). For four-class navigation (Standing, Forward movement, Left and Right turning), a hierarchical ensemble combining EEGNet and ShallowConvNet achieved 62.9 ± 9.0% with AOMI versus 51.1 ± 8.9% with MI (p = 0.002). These findings suggest that while MI alone suffices for simple binary decoding, AOMI introduces temporal or phase-locked features that are not apparent in grand average spectral analysis but become critical as the navigation command space expands.