First off... I don't think I buy the "but the power!" argument. Aside from atmospheric absorption (which isn't that significant), photons are going to keep until they hit something. Thus, as long as you are emitting most of your light in a useful direction, it doesn't matter how far away the light is from the "ground" if your goal is for more-or-less even illumination. Moreover, if your cylinder is mostly growing things (which seems likely), the percentage of "cropland" to areas that don't need to be lit is probably high. So, while you could save some by not lighting things like roofs, this may not be significant or worth the headaches of having thousands of lighting elements versus only a few.
As far as view obstruction... I'm not sure this can be solved. The light has to come from somewhere, and that "somewhere" is going to produce light that is more intense than what you get from diffusion. Looking in the direction of the light source will thus probably be contraindicated, no matter where it is. A central light will be a bit like a sun, and yes, you won't be able to look directly past it. However, many low-level lights might make the entire sky too bright to look at, unless you are above the lights.
So... all that said, I think you have four choices that come down to a number of trade-offs:
Pros: Reduced maintenance due to use of a single element. Nearly 100% of light does useful work (i.e. you don't need reflectors to minimize inefficiency). Similar to having a sun that is always at equatorial noon.
Cons: Single point of failure. Blocks view of exact opposite of cylinder.
A better design might be to have a shaft through the center of the cylinder that is surrounded by lights. I can think of all sorts of interesting uses for such a shaft. This would add the need for reflectors, but you'd still have 180° or more of useful light.
Pros: Reduced maintenance due to use of a few (three or six, depending if you have a central ring sea) elements. Center of ring is unobstructed.
Cons: Optimal light arcs are 60° or 120°, and not sure what will happen in regions of overlap; may require "interesting" design to achieve balanced illumination. Looking directly at lights is probably contraindicated, but probably no worse than central light scenario.
For day/night, you can dim and turn off the whole system, however, it might be interesting to dim the lights in a cycle, though you probably won't get a terribly dark "night" this way.
"Parking lot" lights
Pros: Many individual elements can fail with minimal effect on the overall system. Can localize light where needed.
Cons: Massive number of individual elements to be maintained. Landing flying craft is going to be a problem. Looking up may not be possible except in areas that are above¹ the lights. If you want tall trees, your lights have to be equally high.
(¹ Yes, you can have a ground-level area isolated from the lights, but by the time you build those walls, which will limit visibility, you might as well just put a deck on top of them and be above the lights.)
Pros: Sky is probably quite hazy, but otherwise can look anywhere. Possibly self-maintaining.
Cons: Almost certainly requires heavy hand-waving. No clear shadows, ever (like an overcast day). Unclear if opposite side of cylinder is even visible.
The idea here is that the entire inside of your cylinder is full of tiny light emitters... enough that the source of light is sufficiently diffuse to avoid any source that is too bright to look towards. You could achieve this effect with a central light surrounded by enough diffusive material, but this becomes an exercise in maximizing drawbacks. Alternatively, you could have floating swarms of micro-lights.
And now, here's an idea out of left field... have multiple layers to your cylinder. Have all the plants and animals on a lower/outer level with all the lights on the "ceiling" (made of glass or something that lets light through), and all the human stuff "above" (with only local lighting, or just use what reflects from the lower level). In the lower/outer level, you can't look up, but the plants and animals won't care. In the upper/inner level you can definitely look anywhere.