Cross sections and a complete set of seven independent spin observables have been measured for inclusive quasielastic scattering of 290-MEV protons from /sup 54/Fe at a quasifree momentum transfer of 1.36 fm/sup -1/ and energy transfers varying from 0--90 MeV. Comparison of the results with relativistic and nonrelativistic impulse-approximation models shows that Fermi-motion averaging, a realistic nuclear response function, and medium modifications of the NN interaction are essential ingredients of a successful theory.