Why are the throttles of aircraft such as the Twin Otter placed on the overhead panel?
I think it was for two reasons:


It makes for straight path for the controls to reach the engines, as all of these are fly by cable. Many of these aircraft where also designed for harsh climates, so I imagine it's an advantage to have less pulleys and other things which might rust and require maintenance. 
There is very little space to place the throttles further down, especially with the control column mounted on the DHC6 Twin Otter where it is. If you did want a pedestal, you'd have to seperate the control columns, requiring further mechanical components, and you'd have to route the engine cables upwards, both of which would be undesirable.




As you mentioned, there are downsides. Commonly mentioned ones are:


It is not particularly comfortable to have you arm raised for an extended period of time, and you lose some sensitivity in it.
You hope that the other pilot used his deodorant that morning.


Other somewhat similar aircraft which use this configuration are the PBY Catalina and Grumman Goose. Another one is the Avro York heavy transport aircraft.