The Bug:
Observers act as transparent blocks with redstone wires.
Steps to Reproduce:
Build the setup as shown in the attachment below.
Place a redstone block on top of the diamond block and watch the redstone lamp closely as you do this.
Take note as to whether or not observers act as transparent blocks with redstone wires.
Observed Behavior:
Observers act as transparent blocks with redstone wires.
Expected Behavior:
Observers would not act as transparent blocks with redstone wires. Instead, they should act as solid blocks.
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Might be intended

But you can for example place torches on it which does not work for transparent blocks, or does it?
It works for glass blocks and for blocks with a solid top face and probably a few others.
It's also the same for Glowstone and bottom slabs, stairs, glass, pistons, hoppers.. all of which are transparent blocks.
As the Observer is (at least partially?) transparent as well, my guts tell me that this should be WaI, but it'd be certainly good to have input coming from the professional tech community, if this behaviour for the observer (do NOT remove it for the transparent blocks I attached as pics here please..) is more benefitting or the opposite in their contraptions.

What's weird is that redstone can travel up the side of an observer, but not down it.
Can confirm in 21w03a.
Can confirm in 21w05b.
Can confirm in 21w06a.
I am able to confirm this behavior in 21w41a. Here are some extra details regarding this problem.
The Bug:
Observers act as transparent blocks with redstone wires.
Steps to Reproduce:
Build the setup as shown in the attachment below.
Place a redstone block on top of the diamond block.
Take note as to whether or not the redstone lamp is powered by the redstone wires.
Observed Behavior:
Observers act as transparent blocks with redstone wires.
Expected Behavior:
Observers would not act as transparent blocks with redstone wires. Instead, they should act as solid blocks.
Might be intended; the observer is treated as a transparent block also in that it doesn't conduct redstone.