I haven't been to Paliki. Per the maps in the book, tho -- one is online at,
http://www.well.com/~kessler/paliki.html
-- the elevation of the northern Paliki "hill" does appear to be significant, for its immediate surroundings anyway. And it's westernmost position makes it clearly visible from the sea: the Greeks of that time were seafaring people -- visibility from the sea would have made that particular hill a landmark, for them, more than some other inland hill perhaps higher but less visible from a boat.
So I'd say, in reply, that first the philology on "far-visible" needs to be looked at: I don't remember Diggle's having done so in the book, did he? That could be a Greek term making specific reference to the sea, or containing some other clue as to what distances might be involved in "far".
If someone here has the Greek and could explain, that might be interesting.
And then we have to remember that we're talking about villagers, here. To a small village, landmarks and most other significant things all get defined in relation to the village: not to anything more global, as we now can see on our maps and GPS and "from Space" -- any villager's universe tends to be his village, even today, and the nearest visible hilll is his "mountain".
So I don't question that Greece today is mountainous, kefalas, or that modern Greeks are not familiar with great mountains. But we're not talking about Greece or modern Greeks, here; we're talking about a tiny village, on an outlying island -- the
most outlying -- a little group of people cut off from most others, feeling little more connection with their "outside world" than traditional aristocratic customs and family relationships might minimally dictate. In Bronze Age Pylos, the nearest hill visible from town would have been "the mountain" -- in Bronze Age Ithaca, it's nearest visible hill would have been their "Mt. Neriton".