Most people who have thought carefully about the risk-free interest rate realize that any real-world security provides merely an approximation to that ideal. The fact that people rarely describe t-bond rates using verbose but more accurate phrases such as "the nearest we can come to measuring the risk-free interest rate" doesn't tell you much about how many fail to see that it's more accurate. I haven't read Black Swan (but have read a prior book of Taleb's). I doubt typical investors ought to follow the advice you've quoted, but it seems plausible that some investors ought to. His description of treasury bills as extremely safe seems accurate enough for practical purposes. It only requires that investors be able to anticipate a U.S. government default / hyperinflation something like 90 days in advance (i.e. it's a good deal more reasonable than describing 30-year bonds as extremely safe). Good investing is mostly about avoiding big mistakes, not about perfectly avoiding all errors, and Taleb's advice would reduce one's risk by a big factor compared to most competing advice.

The claim that "when you have to actually bet, you still bet at 1:5 odds" overlooks some information that is commonly communicated via markets. When I trade on a market, I often do it by submitting a bid (offer to buy) and/or an ask (offer to sell). The difference between the prices at which I'm willing to place those two kinds of orders communicates something beyond what I think the right odds are. If I'm willing to buy "Hillary Clinton Elected President in 2008" at 23 and sell at 29, and only willing to buy "Person Recovers from Cryonic Suspension by 2040" at 8 and sell at 44, that tells you I'm more uncertain about wise odds for cryonics than for the 2008 election. For more sophisticated markets, option prices could communicate even more info of this sort.

I doubt that anyone is advocating the version of the Modesty Argument that you're attacking. People who advocate something resembling that seem to believe we should only respond that way if we should assume both sides are making honest attempts to be Bayesians. I don't know of anyone who suggests we ignore evidence concerning the degree to which a person is an honest Bayesian. See for example the qualification Robin makes in the last paragraph of this: http://lists.extropy.org/pipermail/extropy-chat/2005-March/014620.html. Or from page 28 of http://hanson.gmu.edu/deceive.pdf "seek observable signs that indicate when people are self-deceived about their meta-rationality on a particular topic. You might then try to disagree only with those who display such signs more strongly than you do." There seems to be enough agreement on some basic principles of rationality that we can conclude there are non-arbitrary ways of estimating who's more rational that are available to those who want to use them.