Capital placement, hill vs observatory

Given the choice of one or the other, is the early production boost and +defense ever worth the lost later beakers?

You need to provide more details. It depends on what you want to do in your game, what other tiles you lose, potentially what civ you're playing, what map type, and probably more. For example, are you aiming for a peaceful early game with a focus on a late game CV such as culture/science? Then IF you can settle an observatory capital with GOOD tiles then do so.

But if you're not getting good tiles as well or your strategy needs as strong early game as possible then don't move out of your way to settle your capital next to a mountain, because observatories do not kick in until much later and Astronomy is also somewhat out of the way (on a Pangaea map). If you find a good location next to a mountain you can always settle an expansion there instead.

All things being equal Mountain is better. Unless you don't plan to get into the late game.

Getting an observatory is better than anything unless you plan on being in an early war and won't be able to get navigation.

I would sacrifice a hill, a river, even a luxury for a mountain capital. Send all of your caravans to, fill out tradition and watch it grow massive. Your science can get truly out of hand with an observatory cap.