The use of capital letters for mantras is puzzling a times. Take the mantra oṃ maṇipadme hūṃ. It's not uncommon to see this written Om Mani Padme Hum, or Even Om Ma Ni Pa Dme Hum etc. Wikipedia is full of this kind of idiosyncratic capitalisation and very resistant to change! Scholars often resort to all-caps: OM MANIPADME HUM. (Note that maṇipadme is one word, not two.)
No Indic script, including Tibetan as far as I know, has capital letters. They just write the sounds, though of course Tibetan includes a number of decorative characters but these are often used to mark the beginning of sentences or texts as a whole and aren't specific to mantras. But let me concentrate on what I know well which is Indic.
Capitals are supposed to be used for proper nouns, for the beginning of a sentence, and for the words in the title of a publication. But of course they are also, less conventionally, used for emphasis in things like advertising slogans and newspaper headlines. All-caps are OK though they don't look so good with Diacritics, and with longer mantras are difficult to read. In this age of email and SMS they appear to SHOUT! Capitalising every word looks a bit vulgar to me, like a slogan. Capitalising every syllable is ridiculous. Some of habits of capitalising religious words date back to the King James authorised version of the Bible which capitalises anything to do with God "In the beginning was the Word, and the Word was with God, and the Word was God." (John 1.1). It's almost as though by using capitals we are seeking to assert the special status of written mantras, an assertion that Indians felt no need to make. If we think a mantra is special then it is only piety to insist on it, and makes us look insecure in our belief. Capitals add nothing to the mantra really - after all the mantra is in the sounds, not the letters themselves, especially not the Roman script letters.
Over many years of contemplating mantras, especially in their written forms I've come to the conclusion that what marks the mantra out is usually the oṃ. Oṃ in Buddhism doesn't have the same kind of mystic symbolism as in Hinduism. Mainly what is says is "what follows is a mantra."
I've long just used lower-case for mantras, along with the academic convention of italics for foreign words. I think mantras are easier to read this way, and the diacritics are easy to see (for those who use them, and everyone should). It also seems a less strident, less ostentatiously pious, more confident way of writing mantras. On the whole we know the significance of a mantra if we are writing it and there's no need for a song and dance routine. Of course there is room for calligraphy and for decorative writing, but if we are representing the sounds then I advocate just using standard English conventions for capitalisation.
The correct way to write the mantra is: oṃ maṇipadme hūṃ.