Those watching destroyer finally torpedoing boat (7)
I believe the answer is:
gallery
'those watching' is the definition.
(eg people in the gallery in a courtroom)
'destroyer finally torpedoing boat' is the wordplay.
'destroyer finally' becomes 'r' (I can't justify this - if you can you should give a lot more credence to this answer).
'torpedoing' means one lot of letters goes inside another (to torpedo can mean to smash into something).
'boat' becomes 'galley' (galley is a type of ship).
'r' placed into 'galley' is 'GALLERY'.
(Other definitions for gallery that I've seen before include "Horizontal mine passage" , "Collection of art" , "Long passage" , "Group of spectators" , "Area for exhibiting works of art" .)