Andrew V. Ettin wrote:
Many ornamental mezuzot are displayed with the scroll text exposed and facing outward. First, is this halachically acceptable? Second, won't this hasten the deterioration of the lettering, necessitating more frequent replacement?
Dear Andrew Ettin,
The mezuza must be rolled with the writing facing inward. A mezuza rolled the other way, with the writing exposed, is halachically unacceptable.
Your second concern is also essentially correct, because the mezuza contains Hashem's name, and it's a Torah prohibition to erase Hashem's name.
There's a custom to write the name of Hashem on the back of the mezuza. Since this is visible when the mezuza is rolled up, therefore the mezuza should be covered. Otherwise, over years and years of people touching the mezuza, this name of Hashem will get erased little by little.
- Shulchan Aruch Yoreh De'ah 288:14,15
- Tractate Menachot 31b