The accident happened shortly before sunset on runway 24. So the
pilots on the 737 would have been looking nearly into the sun whereas a
pilot looking back would be seeing a landing light in a darkening sky.

How is it that they were able to see the runway but not an airplane of 95'
wingspan and 82' length sitting on it?

Because they were human and sometimes make mistakes, especially under
conditions of poor visibility such as caused by having to look in the
direction of the sun near the horizon.

Why would a pilot looking back see a
landing light in a darkening sky if the sun was brightly shining on the
approaching airplane? You can't have it both ways.

Go out just before sunset and look at the sky in the direction opposite
from the sun. You should notice that it's already considerably darker
than at midday even though the sun has not yet set. Looking in that
direction a plane would be very easy to see because it would be
brightly lit by the sun and is set against a darker background sky. If
the landing light is on that would make it even more visible.

So at the time of this accident the crew of the landing plane had
relatively poor visual conditions while if the crew of the plane on the
ground had been in a position to look back they would have had
excellent visibility.

When I find the sun shining in my eyes like that I adjust my visor.

That helps but certainly doesn't fully eliminate the problem.

But regardless of the details of this particular incident, why not have
the redundancy of having both aircraft crews in a position where they
could observe and possibly avert an imminent collision?

That would require the airplane in position to turn towards approaching
aircraft and defeat the purpose of position and hold.

Presumably the purpose is to be able to respond quickly to a clearance
to take off. If the plane is angled but full power can still be
applied and the plane's path down the runway straightened out in the
first few seconds of the takeoff roll then no time would be lost and
the same purpose would still be achieved.