Hopefully the Book Club will get around to covering that as part of Chapter 4.

I can't recall that it has anything to do with "updating your prior"; Jaynes just says that if you get nonsense posterior probabilities, you need to go back and include additional hypotheses in the set you're considering, and this changes the analysis.

See also the quote (I can't be bothered to find it now but I posted it a while ago to a quotes thread) where Jaynes says probability theory doesn't do the job of thinking up hypotheses for you.