How effective is this design for an archer tower?

Solution 1:

In general, a normal crossbow dwarf can shoot things +/- 3 z-levels, and about 20 tiles away, with decent accuracy. As they get more skilled their range goes up (I know I have seen shots upwards of 50 tiles away that are lethal from master crossbow wielders). Also note that shots from above are significantly more effective than shots from below, so I think you'll be ok there.

As far as what they'll try to shoot at, that depends on how you assign them. If you set them on patrol, they will wait until they see something close by, and I doubt your tower is going to qualify. But if you specifically order them to attack a target, but they can't get any closer, they will start firing at it. If you've trained them up high enough, they could be reasonably effective.