Motl clearly knows far more physics than I do, but my impression is that he has misunderstood the paper he is criticizing. For instance,

  a commenter in the fast comments reminds me that \(\lambda\) is indeed
  meant to be a non-quantum "ontological state" of hidden variables, so
  the very usage of \(\lambda\) means that they violate the basic rules
  of quantum mechanics: but the text makes it clear that they believe
  that they are allowed to do so

I have not fully understood the paper, but my fairly clear understanding from the introduction is that it is addressing precisely the question of whether there is a (\lambda) which provides a more informative/predictive description of the physical system. I also think he misunderstood the Einstein quote at the beginning, ("...even Albert Einstein is accused of being too probabilistic!") Einstein was implying that he believes there is a more informative (\lambda) still to be found. The quote is completely consistent with the hypothesis of the EPR experiment.

The controversy is laid out very clearly and nicely in an essay[1] by E. T. Jaynes, whom they also quote from. (Incidentally, Jaynes was a physicist at WashU in St Louis. I accept that he could be a "crackpot" despite this, but I think Motl should lay off the personal attacks, or at least do a little more research before he goes on the warpath.)

[1] Pg 1011 of http://omega.albany.edu:8008/ETJ-PS/cc10i.ps section beginning "But What About Quantum Theory?"

EDIT: They didn't actually quote from that essay, they quoted from Complexity, Entropy and the Physics of Information, but it's the same message.

Why is it especially important that the author's name is female ("even though it doesn't look like one")?

Not only is it not relevant, it reveals a deep personal bias that only serves to taint the rest of the article's assertions.

Less of this, please.

The main thing you got out of this long article about quantum mechanics was a parenthetical aside in the first paragraph?

Lubos Motl is a smart guy, but he's known for having his own somewhat strongly-held opinions on quantum mechanics. I don't believe his assertion that it's a "crackpot paper", but am sympathetic to his argument that Nature is over-hyping the paper.

I would really need to sit down and read the paper carefully (as well as Motl's rebuttal) before I can have a more informed opinion than that, though.