So, then, it the 'theory of evolution' is proven fact,
That's not what he said. Work on your reading comprehension.
why is it still being discussed and challenged? A fact can't be challenged.
Oh come on, you can't be this naive -- there are *always* people willing to challenge facts, no matter how well established and obvious. Consider liberals, for example.
People often argue against even the most undeniable of facts, because people are not always motivated by rational considerations -- they're frequently motivated by emotional factors, a desire to believe something more comforting than reality, etc. etc.
A plane can fly? Of course.
And organisms can evolve. Of course. We've directly observed it occurring.
Ha anybody actually observed a species, like a large animal, evolve into something which might rightfully be called something else?
Yes. Within human observation the mammal species on the left has split/branched to spin off the mammal species on the right:
Sure, they're both still canids, but the point is that the domestic dog is *not* a gray wolf any longer, they're now "something else".
For other examples, see Observed Instances of Speciation and Some More Observed Speciation Events. If you want something even more drastic, however, you're making an unrealistic request -- the amount of evolutionary change that can be observed over human history (on the order of thousands of years) will be relatively small compared to long-term evolutionary change which requires on the order of millions of years. It's like asking geologists to "directly observe" a full mountain range forming starting from flat terrain, or asking astronomers to "directly observe" the full life cycle of a star.
Nonetheless, there are many ways to confirm the existence and behavior and reality of long-term processes such as these, and the evidence for evolutionary common descent is vast and overwhelming. For a description of how such scenarios are confirmed beyond reasonable doubt, see Explaining the Scientific Method, which discusses scientific validation methods in general, and specifically in the context of evolution.
That there are similarities within the animal kingdom or the plant kingdom, does not mean that one directly evolved from the other.
Of course not, but the evidence for evolutionary common descent is *vastly* more specific and overwhelming than just a simplistic observation of " similarities within the animal kingdom"... See this post for just a tiny sample of the tip of the enormous iceberg.