Yes, that's the chapter.
For a Bayesian to relinquish his original hypothesis that the distribution belonged to some family, he needs both a way to notice when the data are far too unlikely to have been produced from any member of that family at all, and a way to choose a different family that will fit better. The likelihood of the data given the prior distribution over the family's parameters is straightforwardly computable (or approximated by calculating various test statistics, when the question you're asking is "is this family of models completely wrong?"), but the process of choosing a new model is rather more murky. The small-worlders talk about judgement, reasonableness, and plausibility, while the large-worlders can at best talk about bounded-rational approximations to the universal prior, which in practice comes down to the same thing.
Andrew Gelman recently linked a new article entitled "Induction and Deduction in Bayesian Data Analysis." At his blog, he also described some of the comments made by reviewers and his rebuttle/discussion to those comments. It is interesting that he departs significantly from the common induction-based view of Bayesian approaches. As a practitioner myself, I am happiest about the discussion on model checking -- something one can definitely do in the Bayesian framework but which almost no one does. Model checking is to Bayesian data analysis as unit testing is to software engineering.
Added 03/11/12
Gelman has a new blog post today discussing another reaction to his paper and giving some additional details. Notably: