I'm a fan of Jason's antics and his promotional ability, but at first glance making this spruce goose fly looks like it would need David Copperfield plus a reduction in the universe's gravitational constant.
Is it really possible to do dmoz/about 2.0 and have a go of it?
Having founded the biggest human-powered search site on the web (600,000 pages) and more recently running a content startup with substantial SEO distribution I have a few comments and suggestions for Mahalo.
To be fair there have been some notable SEO successes. About.com is probably the biggest seo win ever, with a $410M sale to NY Times in 2005. About has been huge into SEO since they they were known as The Mining Company. About guides got an SEO manual when they joined and were directed to author high-value seo content, as Mahalo is doing with its staff. About now has approx 3-6M pages indexed in Google.
dmoz wasn't seo driven itself but was a huge presence in the early seo industry. Because we gave the dmoz data away and so many other sites put it up, getting a link in dmoz meant that you instantly had thousands of links from across the web. Plus dmoz.org was PR10 for a while which was nice. You had to have a link in dmoz just to get to the "base" level of pagerank a normal website should have. Google had to adjust some of their algs because the pagerank warping effect of this was so huge.
But the most succesful SEO site currently is Wikipedia. They get a full 2% of Google's outbound traffic. I don't expect that to last at the current level, Wikipedia is showing up in too many searches and it's gone over the line. But Google's quirky aesthetics are OK with Wikipedia being there because it is on the non-commercial side of the fence and is hugely open.
At this point though I'm thinking SEO has gotta be dead as a startup business model. It was kind of unknown stuff in 2003 but now the cat's out of the bag. It seems like the last attempt of web 2.0 sites that aren't able to get social adoption is to start flooding the Google index with tag landing page spam or a crappy template page for every restaurant in the country.
We know this from experience: No one will ever go to Mahalo directly, just as no one ever went to About.com, dmoz, Tripadvisor, Nextag, IMDB or any other vertical or broad-but-shallow site. Google is where everyone starts and Mahalo's distribution strategy has to be SEO. Its traffic is going to live or die based on SEO skill and Google's continued favor.
If Mahalo doesn't get SEO traffic it's gonna have to morph into something else. In the past a site like Looksmart that had lots of editorial generated directory content could sell that to other portals. Those days are over though with content being commoditized so I doubt there is big licensing revenue in Mahalo's future. But Jason is smart and wily and I'm sure he'll keep twisting the cube until he finds a solution.
The other structural challenge with human powered directories has always been maintenance. It's not just the labor effort to create the pages in the first place, you also have to revise them regularly to keep them up to date. Otherwise they rot. So there is an ongoing cost to keeping a site with N links to periodically revisit and re-evaluate each every M days. Wikipedia is more resiliant against rot because it is substantially a historical/reference site. But the topical/commercial queries Mahalo is targetting will require periodic review, or they will start looking dated in a year or two. Links rot, spammers take them over, or they simply point to out-of-date resources. So you have to re-author all your pages every 3mo-2years depending on how topical the subject is. We crawled dir.yahoo way back and they were 8% dead links, some categories hadn't been visited by yahoo editors in years. This was the inspiration for dmoz but even it succumbed to a similar fate, just on a bigger scale. :)
In the meantime here are some tactical comments for the Mahalo site itself:
instead of underscores Jason! You too outside.in. C'mon guys, this is
- Put the guide note under the <h1> and call it <h2>,
it'll do better. Mahalo needs lots of guide notes. Without the
contiguous block of text from the guide note, the links aren't enough
to validate a landing. 250 words is ideal but anything is better
- <title> should match <h1> should match url.
Don't forget to add <meta name="description">, this should
match the <h2>
- Not really seo but a general idea ... Reference pages in
general are boring. Jason is the supreme master of linkbait...
Could each mahalo page be turned into a controversy of its own?
When someone biases a wikipedia page, it gets more attention and
traffic, not less...
- Marshall Simmonds was the SEO expert at TheMiningCo/About. He MADE
that site. I bet he singlehandedly enabled 90% of the $410M of value.
"$410 million for SEO? I'll bet they could hire marshall simmonds, About's director of search, for a fraction of that." 
Marshall gave a talk at WebmasterWorld Pubcon 2004 where he laid out About's whole seo strategy that had made them so successful. The ppt was on the conference CD. Unfortunately I've lost mine but I'm sure you can track down the talk. You need to see that deck.
- Minor but if you are concerned with speed, then: 1) remove urchin, 2) 15% of mahalo's pages are whitespace, that may compress or not but eliminating that before sending the page out is hygienic. 3) Don't forget the 14 rules.
YMMV. Good luck.