I was able to get the networking demo working with Lerpz character. When i try to replace lerpz in the demo with my own character (by making my own prefab and same scripts), it doesn't work (it spawns my character but other clients cannot see it). I noticed that when I create my own prefab and added Network View, the "Observed" under Network View points to my prefab(transform) but the Third Person prefab in the demo has "Third Person Player (network)" under Observed. How can that be replicated? is there something else i'm missing? (i know this sounds very basic but please help)
It sounds like there's a ThirdPersonPlayer script that you need to drag to the "observed" slot on the Network view, which is presumably using OnSerializeNetworkView to synchronise the character object.
The observed variable can be changed either in the editor (by simply clicking on it and selecting from the list exactly what component you want to be observed), or alternatively with code using NetworkView.observed.
I'd suggest you check the manual again to understand exactly what's going on under the hood... A good place to start reading about the "observed" property and what exactly it does (State sync) is found here. If you still have a problem, post back...