I'm not sure what difference that makes with regards to the science penalty making settling new cities sub optimal. It's 5% regardless of difficulty level, no?
Can you explain?
Well, for one thing, settling new cities with unique luxuries is very difficult beyond 5 on Deity, and happiness is a killer. For another, it's very hard to get any of the wonders that would relieve the burden, like Notre Dame, etc. And every new city you found is 1 population, contributing way less than 5% of your beakers until you get at least 4 pop and a library. So, the *cost* of founding a new city is really: 7 happiness, a monument, granary, library, 3-5 turns of culture, and 3-5 turns of tech. IMHO.
The other thing to remember about settling new cities is that it sets you back on whatever National Wonders you haven't finished yet. So, the "science penalty" for adding a 7th city is that you now have to rush-buy a university, or you can't finish Oxford. I mean, above the obvious 5%. The last thing you want to do when founding an 8th city is rush buy library, monument, colosseum, market, barracks, university or police station. Often you need to make more than one of those to restart your NW, which will also take significantly longer because you have 8 cities. Universities are usually the crux of the issue because of the timing. Right when you'd want a 7th city, even if there were room for it

you'd be interfering with the completion of Oxford.
Liberty *is* nerfed right now, because of the science penalty, and because of the nerfs to local happiness, etc. etc.
It's just not *as nerfed* as Piety or Honor. Whereas, Tradition has gotten more appealing with every patch/update.
Liberty is still very viable on Deity because of the value of getting a city out on turn 33, another on turn 40, and another on turn 45. (Pretty much typical if you go Scout, Monument, even without a culture ruin, assuming you build your capital on a hill)
EDIT: Also, what Moriarte said. He knows Liberty a lot better than I do.