I doubt that it will feel any more like a nerfed Apprentice than Smithy feels like a nerfed Torturer. Sure, its effect is strictly worse than Apprentice, but it's much cheaper, and it plays out very differently. You can only open Apprentice 1/6 of the time, but you can always open Observatory, so you can get started on the trashing right away. In the end game, you can't use Observatory to explode into a megaturn, which is one of the things that makes Apprentice so great. But you can use it to trash a good card to set up your next turn, which is what I think makes it such a cool card. Let me elaborate.
The other non-Remodel-type scaling TfB cards in Dominion are Salvager, Apprentice, Bishop, and Trader. (For now I'm defining Remodel-type cards as cards which gain card(s) based on the cost of the trashed card(s), so that includes things like Forge and Stonemason.) All of these except Trader (as well as most Remodel-type scaling TfB cards) like for you to kill your powerful cards in order to get an immediate bonus when you know the game is ending soon. That's a great, fun, and interesting mechanic, but we already have a nice share of cards that do that. Observatory gives you a decent bonus for trashing good cards, but it's still not really anything to write home about, and I think that will take quite a bit of finesse to use properly. I imagine that cases in which it is worthwhile to trash a good card in order to stack your next turn will not be rare, but they will also not be nearly as common as with Salvager, Apprentice, Bishop, and Remodelers. I can see clearing two green cards from your next hand at the cost of a $5 card that's losing its utility making the difference from a Duchy hand to a Province hand, so I don't think the scaling aspect is useless above $2 as others have suggested.
That all sounds good in theory, but I challenge you to come up with specific cases where it's actually a good idea. You're willing to trash a card with Salvager because it'll earn you a huge profit. Salvage a Gold? That's a $3 profit over playing the Gold. Maybe you have only one action left, so salvaging another Action card is often a good play in the endgame. Likewise with Apprentice, if you trash a Gold or $5 Action card, it's because it's likely to boost you to a Province or double-Province turn. Similar logic applies to Bishop.
Unlike Salvager, Observatory is non-terminal, so when you trash a card, be it a Treasure or Action, you are always forgoing
playing that card. If you trash a good card with Observatory, you have a
chance of replacing it with another good card in your hand and clearing out some dreck from the top of your deck. Will the card you draw be better than the one you trashed? Maybe. You're still down a card in hand from playing Observatory and you permanently lose the trashed card. As for clearing two green cards from your next hand, Scout does that
without making you trash your cards. Heck, Develop is a TfB card that can sacrifice a good card to give your next turn a huge boost. Yet it's not topping any list of power cards.
EDIT: Yes, Observatory is probably good with Rats and maybe Fortress, but only when there's no other TfB on the board.