I think it would help to better understand just what an operator is. An operator, like a position operator, is a very idealized entity-- it is the operator X whose eigenvalues are x, and it lives in a Hilbert space of possible operators. This is all the mathematics of quantum mechanics, but it doesn't have a whole lot of direct correspondence with reality. That's OK, the theory is intended to idealize reality, we do that all the time in physics. But in reality, we can only do a measurement with some precision, so the "eigenvalue" of a measurement is not actually an outcome x, which is continuous, it is a discrete outcome like "bin #47". All experiments must be like that, we do not actually have access to continuous outcomes.
Indeed, our apparatus might read outcomes that are more precise than the actual eigenvalues really are-- if you time a nuclear decay with a stopwatch that has many digits of accuracy, but you are just pushing the button on the stopwatch when you see a flash that some nucleus has decayed, clearly the number on the stopwatch reports a precision that simply does not exist in the experiment. But barring experimental error like that, which you are right to classify in a different category, every experiment has some true precision, and it means there is effectively only a finite number of discrete meaningfully different outcomes for that experiment.
But these discrete position operators are awkward to write out, it is much easier to just treat them as the X operator with eigenvalues x, even though that's a different measurement than the one we are doing. The distinction won't matter, we can use the replacement operators and imagine the replacement experiment, whenever we are planning on binning these outcomes to define the outcome of the actual experiment. In other words, a real experiment with finite precision can be obtained by binning imagined experiments that we are not actually doing, and that's what |psi(x)|2dx means-- binning outcomes of impossibly precise observations over a dx bin to account for the outcomes of possible observations. The same holds for expectation values-- if you want to know the expected x for a real observation, you can find the expectation value of the x eigenvalues of the impossible experiments, and expect that if the precision is high enough, the expectation values will give similar averages for either the impossibly precise idealized experiments, and the experiments you can actually do.
On the issue of "collapses", there seem to be two ways the term gets used. One is when you decohere the eigenstates of a given subsystem when a measurement is done (where by measurement we mean precisely the act of decohering a certain set of eigenstates), but that's not really a collapse because it's pure quantum mechanics-- it only yields a mixed state because it is a projection onto a substate. What I would mean by "collapse" can only occur when the outcome is considered as being registered, so that the mixed state "collapses" into a definite state of the subsystem. In other words, many people seem to use the term collapse to mean pure-->mixed, but I think a more appropriate meaning is mixed-->pure.