Capital letters, initially and finally, turning up in ciphers (4)
I believe the answer is:
oslo
'capital' is the definition.
(Oslo is an example)
'letters initially and finally turning up in ciphers' is the wordplay.
'letters' becomes 'omegas' (omega is a kind of letter).
'initially and finally' says to hollow out the word (remove centre letters) (only the first and last letters are used).
'turning up in ciphers' becomes 'lo' (I can't explain this - if you can you should give a lot more credence to this answer).
'omegas' with its middle taken out is 'os'.
'os'+'lo'='OSLO'
(Other definitions for oslo that I've seen before include "Location" , "European capital city (found in Czechoslovakia!)" , "Former Christiania" , "Nordic capital" , "Scandinavian capital" .)