The biggest failing I see this is argument is hierarchy. Sure, 16 point Georgia looks sexy as hell. If you have a text heavy website with little navigation, I'd definately recommend it. But in real world design situations, it's a mess. Even the Information Architects site looks flat. There's no easy way to guide the eyes because everything is ultra readable. There's no structure. It's an idealistic shortcut to readability.

For me, the most pleasurable reading experience I can think of is Instapaper on an iPad. What's the default size on that? I could be wrong, but I doubt it's anything larger than 14-16.

Besides, is it really a "costly mistake"? Is Facebook is failure because the text is small? Is Apple's website is design disaster? Both sites (and many more) feature a mix of large and small text with modest sized body. They're navigation is thought out and structured.

The 16 pixels argument encourages the opposite of that.