There are two requirements that a character must meet in order to be declared as an attacker or defender:
- Have the appropriate challenge icon.
- Be standing when the player declared them.
The first part of Obara's ability, "Obara Sand may be declared as a defender during [Power] challenges in which you are the defending player..." provides a direct exception to #1, letting you declare her as a defender in a POW challenge initiated against you whether she has the icon or not.
The second part of her ability, "...even while kneeling," provides a direct exception to #2, allowing her to be declared as a defender in these challenges whether she is standing or kneeling.
However, even though Obara's ability provides exceptions to the requirements a character must usually meet in order to be declared as a defender, she still must actually be declared. (Compare this to Jon Snow, for example, whose ability doesn't "declare" him as an attacker - he is simply considered to be one.)
That's why Stealth works against Obara. Stealth puts an absolute bar on being declared as a defender, whether the character meets the normal requirements or not.