Sniffnoy comments on But Somebody Would Have Noticed - Less Wrong
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The problem is, how do you exclude it from working? If you're just working in first-order logic and you've got a "membership" predicate, of course it's a valid sentence. Russell and Whitehead tried to exclude it from working with a theory of types, but, I hear that has philosophical problems. (I admit to not having read their actual axioms or justification for such. I imagine the problem is basically as follows - it's easy enough to be clear about what you mean for finite types, but how do you specify transfinite types in a way that isn't circular?) The modern solution with ZFC is not to bar such statements; with the axiom of foundation, such statements are perfectly sensible, they're just false. Replace it with an antifoundational axiom and they won't always be false. However, in either case - or without picking a case at all - Russell's paradox still holds; allowing there to be sets that are members of themselves, does not allow there to be a set of all such sets. That is always paradoxical.
It's not recursive unless you're already working from a framework where there are objects and sets of objects and sets of etc. In the framework of first-order logic, there are just sets, period. Quantification is over the entire set-theoretic universe. No recursion, just universality. In ZFC sets can indeed be classified into this hierarchy, but that's a consequence of the axiom of foundation, not a feature of the logic.
I prefer to not have either foundation or an anti-foundational axiom. (Foundation generally leads to a more intuitive universe with sets sort of being like boxes but anti-foundational axioms lead to more interesting systems).
I'm also confused by cousin it's claim. I don't see how bisimulation helps one deal with Russell's paradox but I'd be interested in seeing a sketch of an attempt. As I understand it, if you try to use a notion of bisimilarity rather than extensionality and apply Russell's Paradox, you end up with essentially a set that isn't bisimilar to itself. Which is bad.