The Dragon’s Eyesight does not work as a range buff for your character but as a beacon. This means once placed, it scans for a very wide area for chests and creatures and will not move after that. As a consequence, if you move after having used one, the scanned area will not follow you.
The scanned area goes almost as far as the maximal distance you can see buildings from.
Once they appear on your screen, creatures can be caught and Treasure Chests can be opened, whatever the distance between you and them may be.
This item does not help in any way to interact with buildings from long distances.
When using a Dragon’s Eyesight, you will see lots of creatures and if you plan on catching all of them, you will need lots of spheres. Prepare a big stock of balls before using one and/or use it next to one or several Pillars of Abundance.
You can use the Dragon’s Eyesight next to a portal so that you can see and catch everything from far away in both the Overworld and the Rift of Arcana.