It made sense to me (although correct me if im wrong because i dont know anything about real math or e8): the room is a collection of furniture, the e8 is a collection of theories. if you rearrange all the furniture, it's still a room full of furniture, but now all the smaller pieces' intended purpose (sitting on them, putting books in them etc) no longer work. he still keeps e8 intact holistically, but he manages to do so only by invalidating the sub theories which make up the e8.
Based on my reading of the first few pages of the paper (available here http://arxiv.org/abs/0905.2658 ), your description appears roughly correct.
E8 is a lie group, which is a set of matrices which is closed under inversion and multiplication. In fact, E8 is a very large group.
Particle physics is based on a set of smaller groups, but these groups are distinct. A "theory of everything" would embed these smaller groups into a single large group. Lisi showed that you can embed these smaller groups into E8, although he didn't show that all the important properties hold.
Garibaldi showed that there are only 6 ways of doing this embedding which don't create higher spin particles. He then showed that none of these 6 ways preserve chirality (the right-handedness of the universe).
So basically, while the relevant groups can be embedded into E8, they don't preserve the physics necessary for a theory of everything.
close?