Does this involve probabilities of zero or just ignoring sufficiently unlikely events?
I don't think there's any way to avoid probabilities of zero. Even the Solomonoff universal prior assigns zero probability to uncomputable hypotheses. And you never have probabilities at the meta-level, which is always conducted in the language of plain old logic.
What can I do with a preference between steak and ice cream? ...
I'm not sure I understand this; is this a choice between objects or between outcomes? If it is between outcomes, it can occur.
Between outcomes. How is this choice going to occur?
More generally, what is an outcome? In large-world reasoning, it seems to me that an outcome cannot be anything less than the entire history of one's forward light-cone, or in TDT something even larger. Those are the things you are choosing between, when you make a choice. Decision theory on that scale is very much a work in progress, which I'm not going to scoff at, but I have low expectations of AGI being developed on that basis.
I don't think there's any way to avoid probabilities of zero. Even the Solomonoff universal prior assigns zero probability to uncomputable hypotheses.
There are people working on this. EY explained his position here.
However, that is somewhat tangential. Are you proposing that decision making should be significantly altered by ignoring certain computable hypotheses - since Solomonoff induction, despite its limits, does manifest this problem - in order to make utility functions converge? That sounds horribly ad-hoc (see second paragraph of this).
...In large
This post describes an infinite gamble that, under some reasonable assumptions, will motivate people who act to maximize an unbounded utility function to send me all their money. In other words, if you understand this post and it doesn't motivate you to send me all your money, then you have a bounded utility function, or perhaps even upon reflection you are not choosing your actions to maximize expected utility, or perhaps you found a flaw in this post.
Briefly, we do this with The St. Petersburg Paradox, converted to a mugging along the lines of Pascal's Mugging. I then tweaked it to extract all of the money instead of just a fixed sum.
I have always wondered if any actual payments have resulted from Pascal's Mugging, so I intend to track payments received for this variation. If anyone does have unbounded utility and wants to prove me wrong by sending money, send it with Paypal to tim at fungible dot com. Annotate the transfer with the phrase "St. Petersburg Mugging", and I'll edit this article periodically to say how much money I received. In order to avoid confusing the experiment, and to exercise my spite, I promise I will not spend the money on anything you will find especially valuable. SIAI would be better charity, if you want to do charity, but don't send that money to me.
Here's the hypothetical (that is, false) offer to persons with unbounded utility:
If I am lying and the offer is real, and I am a god, what utility will you receive from sending me a dollar? Well, the probability of me seeing N Tails followed by a Head is (1/2)**(N + 1), and your utility for the resulting universe is UTILITY(UN(N)) >= DUT * 2**N, so your expected utility if I see N tails is (1/2)**(N + 1) * UTILITY(UN(N)) >= (1/2)**(N + 1) * DUT * 2 ** N = DUT/2. There are infinitely many possible values for N, so your total expected utility is positive infinity * DUT/2, which is positive infinity.
I hope we agree that it is unlikely that I am a god, but it's consistent with what you have observed so far, so unless you were born with certain knowledge that I am not a god, you have to assign positive probability to it. Similarly, the probability that I'm lying and the above offer is real is also positive. The product of two positive numbers is positive. Combining this with the result from the previous paragraph, your expected utility from sending me a dollar is infinitely positive.
If you send me one dollar, there will probably be no result. Perhaps I am a god, and the above offer is real, but I didn't do anything beyond flipping the first coin because it came out Tails. In that case, nothing happens. Your expected utility for the next dollar is also infinitely positive, so you should send the next dollar too. By induction you should send me all your dollars.
If you don't send money because you have bounded utility, that's my desired outcome. If you do feel motivated to send me money, well, I suppose I lost the argument. Remember to send all of it, and remember that you can always send me more later.
As of 7 June 2011, nobody has sent me any money for this.
ETA: Some interesting issues keep coming up. I'll put them here to decrease the redundancy: