In this paper, a systematic approach is proposed for wide-area oscillation damping control, which can handle data-packet dropout in the communication channels of a smart power grid with large-scale deployment of distributed and networked Phasor Measurement Units (PMUs) and wind energy resources. To that end, a reduced order dynamic equivalent model of the New England-New York power system with replacement of two existing synchronous generators (SGs) by two doubly-fed induction generator (DFIG)-based wind farms (WFs) is considered. One of these SGs was equipped with a power system stabilizer (PSS). The issues with electromechanical oscillation damping control through WFs using locally available signals is identified and a methodical way for appropriate selection of control input and remote feedback signals through modal analysis is presented. The remote feedback signals transmitted through communication channels encounter data dropout which is characterized by the Gilbert-Elliott model. Deterioration in the performance of the oscillation damping control is demonstrated when data-packet dropout takes place in the remote feedback signals from PMUs. An Observer-driven Reduced Copy (ORC) approach is proposed to improve the damping performance under data-packet drop scenarios where conventional feedback would suffer. Nonlinear time-domain simulations following large large disturbances (e.g., faults, line outages, etc.) demonstrate that the ORC gives significantly better performance compared to conventional feedback under higher data drop situations.