Is National Pension Scheme(NPS) not a good investment?

The way the question is worded, it is slightly opinion based.

Just to point out;

Tax benefits - Upto 50000 INR is tax free when invested here.

This is actually 200,000 INR under 80C. So if you invest max of 150,000 in other instruments in 80C; you can still invest 50,000 into NPS.

Hopefully it will provide some lumpsum money that I could probably use to buy a house / kid's education / kid's marriage.

There are very few withdrawal options. Generally in the current scenario; By the time you retire; you would already have house, kid would have got married.

Answers

given the current data is it a worthwhile investment?

It is a good investment option available. It is up to individual to select this or invest else where.

If yes, would be better to fix choice at 50% in E and 25% in C and E or go for the auto choice?

As you are young it is better to have max 50% in Equity and actively monitor this and change the percentage as you near the retirement age. If you don't have time, or are not financial savy, or one is plain simple lazy; going with Auto choice makes sense.

bad investment because if you put the same money into equity oriented mutual funds then you will get better returns ...

This depends. If you are currently investing everything into Equity; then yes at absolute level, the returns are high. However if you are investing into Equity and debt to achieve a balance, then NPS is doing it automatically for you. As the NPS has very low costs, there is substantial advantage. In some years [2013-2014?] the NPS equity return has been excellent and exceeded leading mutual funds.

Other Aspect

• Annuity market in India is not yet mature. Whether this will mature in 20 years time is speculation. Hopefully it will be more mature. What this means is the 60% money that is kept as Annuity; will give returns of around 4% 6.5% [Today's market rates for annuity products]. While the current Bank Fixed Deposit Rates are in the range of 6-8%.
• If NPS is offered by Employer that it does make slightly better compared to EPF.

Edits:
The Annuities need to invest in guaranteed risk free instruments; generally bonds. As the rates are locked for life, they need to factor things like average life expectancy, demographics, etc. This is largely statistical. Similar to how the Insurance premiums are decided. This is adjusted periodically. Say they offer 6.5% for 100 people. The investments into bonds is yielding only 6%. Then for next 100 people, they would offer 5.5%. However if the mortality increases, i.e. 50 people die at age of 70, they just need to adjust it to 5.75% for next 100 ... so there are quite a few parameters that go in and statical models output what the rate should be offered. At times the corpus manager may take a hedge to minimize downside. This is a specialized subject and there no dummies that show how rates are determined. It is also a trade secret.