Yeah, in general, Atomic Theory is the way to go. On certain maps and difficulty settings, Penicillin is a better choice, but that's not relevant to this gauntlet.
I do things a little differently than Memoryjar with regards to GS and Oxford. You actually only need (less than) one extra GS for Penicillin if you use Oxford and Rationalism on Plastics/Penicillin. However, if you don't have great GS points, and you're burning a GS to enter the Modern Era, it kind of evens out as 2 extra... sort of.
If you're jumping 2 eras in one turn, (Industrial->Atomic or Renaissance->Modern) you need even more GS, but you shave turns off the time to victory. I wouldn't recommend trying that until you're very good at warlike diplo.
Mostly I use Penicillin for Emperor+ islands or continents where you'll be using Navigation for conquest anyway... once you're doing that, you might be better off with Penicillin. It's also a good choice for any situation where you're struggling to hit Atomic in one cycle. You can fill out more pre-reqs of Penicillin without founding the world congress, which can help. This is especially true if you have to delay founding because you haven't found the last civ. However, again, none of this is relevant to a settler gauntlet.
Regarding observatories, on Settler, with Bismark, it's absolutely worth it, if you get the right dirt and manage your tribute-based economy well enough to rush buy them.
Also, I believe Astronomy is totally worth it unless you have an ideal map. You don't even know until at least t90 or later whether you need Astronomy. Are you going to restart if you do? So, there's that. If you're going for Astronomy anyway, you might as well try to find some mountain spots for your cities. Plus, Caravels are really good at extracting tribute and protecting your cargo ships. Also, Compass = one extra cargo ship. That's my logic.
I'm working on my best start so far, where I could have had sub-t80 Education. I actually delayed it to get Ironworking and Engineering first. (For the 2 extra cargo ships)
In my opinion, that delay was *totally* worth it. Growth is everything on Settler.