Specifically, Tao's comment:
I have read through the outline. Even though it is too sketchy to count as a full proof, I think I can reconstruct enough of the argument to figure out where the error in reasoning is going to be. Basically, in order for Chaitin's theorem (10) to hold, the Kolmogorov complexity of the consistent theory T has to be less than l. But when one arithmetises (10) at a given rank and level on page 5, the complexity of the associated theory will depend on the complexity of that rank and level; because there are going to be more than 2^l ranks and levels involved in the iterative argument, at some point the complexity must exceed l, at which point Chaitin's theorem cannot be arithmetised for this value of l.
(One can try to outrun this issue by arithmetising using the full strength of Q_0^*, rather than a restricted version of this language in which the rank and level are bounded; but then one would need the consistency of Q_0^* to be provable inside Q_0^*, which is not possible by the second incompleteness theorem.)
I suppose it is possible that this obstruction could be evaded by a suitably clever trick, but personally I think that the FTL neutrino confirmation will arrive first.
He's such a glorious mathematician. <3
We've discussed Edward Nelson's beliefs and work before. Now, he claims to have a proof of a contradiction in Peano Arithmetic; which if correct is not that specific to PA but imports itself into much weaker systems. I'm skeptical of the proof but haven't had the time to look at it in detail. There seem to be two possible weakpoints in his approach. His approach is to construct a system Q_0^* which looks almost but not quite a fragment of PA and then show that PA both proves this system's consistency and proves its inconsistency.
First, he may be mis-applying the Hilbert-Ackermann theorem-when it applies is highly technical and can be subtle. I don't know enough to comment on that in detail. The second issue is that in trying to show that he can use finitary methods to show there's a contradiction in Q_0^* he may have proven something closer to Q_0^* being omega-inconsistent. Right now, I'm extremely skeptical of this result.
If anyone is going to find an actual contradiction in PA or ZFC it would probably be Nelson. There some clearly interesting material here such as using a formalization of the surprise examiation/unexpected hanging to get a new proof of of Godel's Second Incompleteness Theorem. The exact conditions which this version of Godel's theorem applies may be different from the conditions under which the standard theorem can be proven.