I think it's absolutely a huge problem. Not only does the town completely dwarf the mountain it's on, but it also is not defensible, so I think it would be a very easy target for attackers. On your point about mines, surely to reach the more valuable materials, they'd go deeper, which would be that much harder at the top of a mountain as opposed to elsewhere. You can keep the mountain town feel, but having it that high doesn't respect realism, and makes all of your terra around the area look very small. A 4-5 block shift doesn't really solve any of the issues I raised in the above post.