"Not sure a lunar observatory would have that many advantages over one in Earth orbit, and it would be harder to maintain."

Well, they are talking about long range planning and assuming that there is significant amount space infrastructure. In this senario labor and materials on the Moon could be cheaper than Earth orbit or anywhere in space.

"The exception to this is radio astronomy. A lunar radio telescope on the far side of the Moon would be shielded from a lot of Earth-based interference."

Radio astronomy makes a lot of sense assuming you can get most of construction material from Moon. A radio telescope could also be continuous sheilded from the Earth's radio noise if in certain areas in the polar craters. Also you could use radar on the Moon- again assuming there is some infrastructure there. Think of how some people envision using the Moon to generate electricity and shipping it to Earth (really really impractical/uneconomical near term). In order to ship power from the Moon to Earth the wholesale price of power on the Moon would need to be at least 1/2 of what is on Earth (just to allow for transmission losses and all the infrastructure needed to transmit it). But say instead power on the Moon is simply cheaper than anywhere else in the space environment, say somewhere around $1 to $10 per KWh. At this price lot's of things become economical- converting water to Rocket fuel is very cheap (as compared to shipping from Earth) as is making iron, aluminum, glass, etc.
So from the point of view of a Lunar power company they want "things" which consume power close to where they are generating it and they want lot's of business (and of course get highest price market will allow). So where there is lots of water, there is lots of potential demand for power. Infrastructure for power is built, then with power in that location, business see opportuny to use that power for other applications (e.g. mining iron). If you want to make iron you need customers (closer the better). A telescope could be made from iron and be a big customer- but not the only customer e.g. a mass driver would need lots of iron. On Earth iron is usually sold by ton but per lb it's around $.05, but if you could buy iron on the Moon for say $1-$10 per lb you are getting iron (a better material than iron) much cheaper than the shipping cost from Earth.
With a competive market on the Moon and given enough time at some point prices could drop to the point where shipping to Earth at competive prices is possible (the Moon environment has inherent advantages which would allow this to happen).
-gb