http://arxiv.org/pdf/physics/0411057.pdf

That is a remarkable error, actually. As far as I can tell, it's basically denying that conditional independence is possible in Nature (!?)

The existence of Bell's inequality is basically a theorem about marginals of Bayesian networks with hidden variables. If you get an independence in the underlying Bayes net, you sometimes get an inequality in the marginal. This is not about causality at all, or about physics at all, this is a logical consequence of a conditional independence structure. It does not matter if it is causal or physical or not. Bell's theorem is about this graph: A -> B <- H -> C <- D, where we marginalize out H. My "friend in Jesus" Robin Evans has some general conditions on graphs for when this sort of thing happens.