Observer right side texture is oriented wrong vertically.
See pictures to understand clearly the problem.
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can confirm for 1.16.220.51

Still affects 1.16.210

This bug is due to hard-coded rotation(s) applied to the observer block textures, and not to the textures themselves. The vanilla resources textures\terrain_texture.json
has different handles for the "east" and "west" sides of the observer, but uses the same texture file for both. However, if you assign a flipped copy of the observer side texture to "east" side, then observers facing north and west show both sides correct and observers facing south and east show both sides upside-down. Vice-versa, if you assign a flipped copy of the observer side texture to the "west" side, then observers facing south and east show both sides correct and observers facing north and west show both sides upside-down. Likewise with vertical observers, you get either both sides correct on upward-facing observers and both sides upside-down on downward-facing observers, or vice versa. I have attached packs that demonstrate this:
By my observation, observers facing the four horizontal directions use the same texture rotations for their sides, tops and bottoms as glazed terracotta. That suggests it's a default rotation logic causing the problem. Somehow, though, the front is always upright when horizontal, and fixed one way when upward and one way when downward. The sides should be have the same kind of fixed orientation.

Affects 1.17.30

Affects 1.17.40.20

Affects 1.18.10
might be the same as MC-107830
Affects 1.16.0