Some thoughts:

Algorithms can be participants in prediction markets. That seems like the most natural way to combine them. There isn't a distinction in kind between baseline odds and other bets---in particular, people can write algorithms and have them participate in markets, the ML algorithm does not need a distinguished role. In this sense my proposal is a special case of Vitalik's, and I think this is the main observation that makes the prediction market proposal workable.
We can choose what the moderator reviews based on dissent in prediction markets. The moderator can review a post when there is sufficiently persistent disagreement to create arbitrage opportunities that are profitable enough to cover the cost of the moderator's time (as in my proposal for arbitrating disagreements), and when there isn't persistent disagreement then we can use the market estimate to decide what to display.
The social cost of putting up content can hopefully be quantified using market liquidity and prices, e.g. as the subsidy needed to make the market clear "well enough." Done right, this could produce estimates that reflect the value of the moderator's time, the ability of other participants to quickly approximate the moderator's judgments, and the probability that a post is spam. (e.g. it would include "friends of trusted users can post more cheaply" as a special case).
The deposit / initial bet provided by a contributor is what actually fixes the security problem you identified in my proposal. Using prediction markets might reduce the size of the problem but I don't see how it qualitatively changes the situation (you still require someone to make informative bets on the market, and that costs something).

I am quite excited about seeing these things worked out in more detail over the coming years.

See also dialog markets.