While it doesn't allow invalid transactions, it does enable rolling back other people's transactions, by a combination of rolling back time and rejecting a class of transactions, such as a particular address. In particular, it allows ignoring all other miners and taking all the newly mined coins.
It's true that the further back in time you want to rewind, the more computational resources. In particular, the further back in time you want to go, the more time it takes to accomplish the maneuver. But if you are a consortium of miners, you were going to spend these resources mining, and the total number of blocks is fixed, so does it cost electricity? I'm not sure.
And apparently the sky is falling. From Ittay Eyal and Emin Gün Sirer at Hacking, Distributed:
But the fact is, this is a monumental event. The Bitcoin narrative, based on decentralization and distributed trust, is no more. True, the Bitcoin economy is about as healthy as it was yesterday, and the Bitcoin price will likely remain afloat for quite a while. But the Bitcoin economy and price are trailing indicators. The core pillar of the Bitcoin value equation has collapsed.
They note previous bad behaviour from GHash (which GHash attributed to a rogue employee).
Their proposal is a hard fork, with different parameters (to make huge mining pools no longer an economically rational choice), but respecting the blockchain to date so they can reasonably keep calling it "Bitcoin".