I think the basic design can be made to work, but it's going to need a lot of support infrastructure, and it still won't be able to do the high-speed duplication and bootstrapping the paper describes. Phoenix refers to this capability to justify his opinion that a nanotechnology breakthrough could rapidly transform the world. I dispute that.
An informal write-up of my take on the design paper is on our website (with supporting calculations here). This post is open to comments on my paper or the original nanofactory paper. Non-LJ users, please use the anonymous commenting feature and sign your name or handle.
[Discussion in comments and in this post.]