Until I read the Dawn Patrol today, I hadn't heard of this guy or his amazing million dollar challenge.
The propriety of his offer to the Smithsonian is covered by Dawn's whip-smart commenters; I'm more concerned here with the challenge itself: "a one-million-dollar prize to anyone who can show, under proper observing conditions, evidence of any paranormal, supernatural, or occult power or event."
Now, a professional magician is in on the joke, so to speak; that's why they call them magic "tricks". And this may be Randi's greatest trick of all, because the offer and the concept are both nonsense.
From his point of view, any unexplainable phenomenon is simply a trick whose secret isn't understood yet, much like sawing a lovely assistant in half. The reasoning is very simple - we used to think the skies were a crystal dome until we made telescopes; we used to think people had humours or demons until we discovered medicine. Like the Cottingly fairies, a simple investigation will expose the deception. Therefore all paranormality may well be divine fakery, the sleightest hand of all.
That naturally brings up the big question - in that case, who is the Magician? A trick presupposes a trickster; to trick on a cosmic stage, one needs a suitably-scaled being.
The second problem is with the offer itself. "To date, no one has ever passed the preliminary tests," the site says. Q.E.D. But how should one even start to go about this business of testing, naturally, a thing that is not natural? A paranormal event is by definition outside the realm of science, the very thing Randi demands must measure the event. It would be like using a ruler to measure the hours or listening to a color. The moment the event becomes duplicable, it becomes scientific - and Randi can then conveniently explain that it isn't supernatural and therefore he doesn't have to pay up. (Q.E.D.)
Incidentally, the Intelligent Design folks are prone to the same base assumption as Randi, and go about answering it the precise opposite way. The Magician is, in fact, a Divine Clinician. Everything He does proves that He is, and they are just as determined as the skeptics to eventually explain it all. They are trying to photograph the fairy. In succeeding, they may inadvertantly prove Randi's point - if it's measurable, it's natural, and his faux-challenge remains unshaken.
Either way, there's no magic left for us. One man claims that it is all smoke and mirrors, and the other claims that the smoke and mirrors are in fact magnificently made. One tries to disprove everything, the other tries to prove everything.
I have run into the same problem, on a vastly smaller scale. As you may know, I write stories with Laser Beams, and one protest I run into a lot is that such things aren't serious. Perhaps not. But the only two solutions offered to me are preposterous. The first? Stop wasting my time writing and settle down to a reasonable pursuit. (It's actually quite funny to hear my well-meaning baby-boomer elders say that.) The second? Write prosaic, "deep" modern novels about people's neurotic little problems - make the world of imagination itself as small as the world of fact. I've read a few of these. Trendy, bitter leftist Jane Smiley wrote a dandy called Moo, recommended to me as a sensible alternative to Lord of the Rings; "That's not literature," my critic friend sniffed. Friends, after reading Smiley's miserable tome I guarantee you that fifty years from now most of her own family won't even remember a word she wrote - but LOR will last forever. I may as well follow the first advice as write a book like hers.
Or I can go ahead and write up all the Laser Beam stories I can because I enjoy them. And that isn't just the answer to my problem, it's also the answer to Randi's challenge. He says I have to duplicate a paranormal event under observation to claim my million; I say that the magician saws the same damsel in half five shows a week, and he doesn't earn nearly that much. Doing it again is no proof. And for the truly amazing things, demanding them again is crass and ungrateful. Could Randi himself be duplicated under identical conditions? He is himself a great work of imagination. And the ID folks are so busy with fluid dynamics that they sometimes fail to notice that water flows. It also burbles, rushes, ebbs, chatters, runs, swirls, dances, and pours.
Our mind is a tool, and not always the best one for the job. Our hearts serve us better when it comes to knowing what is, and is not, magic.
UPDATED - Joel of chezjoel strikes with some pertinent commentary. You should read all the comments, especially the entertaining troll dancing.