rarely see that word
See that a lot and make sense
Why don't we ever say standers-by or pass-byers?
just grammaticly not correct for the English language.
A by-stander is not standing by, nor is a pass-byer passing by
Don't take the word as a literal definition
by-stander, just means someone who happened be somewher close by and saw the incident with decent clarity.
This could mean anyone who is near by or 100 feet away.
Just don't take things by there name.