Question

UPDATE 07.24 : The set of answers for this question seem to have stabilized. I encourage all who visit this question to review all of the answers and comments posted here and posted behind the meta.mathoverflow link in the question. This answer has an incomplete summary; you might find what you need in one of the other posts.
END UPDATE 07.24

Thanks to all who have contributed thus far.

I liked Igor Pak's notion of giving the author the same amount of time as a referee to have the author do the fix on his own. I also liked his list of potential responses, including alternatives to avoid or use as a last resort.

I appreciated Pete Clark who pointed out that the emotional impact on the author may be considerable.

I thought algori's notion of substantial error (one that could not be fixed with the methods used in the paper) was a good benchmark regarding severity of error.

I and others liked Andy Putman's advice to seek out, shall we say, more experienced counsel before acting.

I thank Timothy Chow for offering an alternative (doing the work for the author of publishing the error) that may well fit my situation.

I also thank Mike Shulman for his notion of wikifying the correction; perhaps authors who have been so corrected could weigh in on this so that we could determine what social/emotional/academic impact this method might have.

I thank Daniel Moskovich for his inspiration to move this society toward a perfect world, at least with respect to correcting errors in papers.

Also, I want to acknowledge the common sense in unknown(yahoo)'s suggestion to continue discussion with the author.

Based on the input so far, I am going to suggest the following as an answer template, to be modified at the dictates of common sense, decency, and situational factors. Recall the assumption that the author has been contacted already and acknowledges the error.

1. Consult with one or more colleagues in the field who can evaluate the error and suggest a course of action. If they suggest dropping the matter, then stop.

2. See if the journal involved has already published a correction. If so, then stop.

3. Contact the author again after a period of time (3 to 6 months) and ask what the author thinks is an appropriate action to take. Offer to assist in writing up a correction, at little or no cost to the author. If the author suggests a reasonable course of action, follow it. Then stop.

4. Prepare your own version of the correction. If the author has not acted in good faith, and if the colleagues encourage the idea, mail the author a copy of the correction as well as a stated intention to post the correction in 3 to 6 months if the author has problems following up with providing his own correction. Keep the correction for your files.

5. If a year has passed since the acknowledgment, and several months have passed since you announced your intention of posting the correction, then (given that it is a good thing to do) post an announcement saying what is being corrected, and provide a link to the details.

In the above, do no harm. In particular, approach the situation with the attitude that, regardless of how poorly the author might respond, the goal is to provide a correction to the academic audience, with as much or more sensitivity and respect due to the author as you would expect for yourself.

It is possible a better answer exists out there. If someone can provide it or a link to it, I will acknowledge it. If this answer gets a substantial number of votes from the community, then I will accept it, with the understanding that the other posters contributed to this answer. In any case, I believe this question and all the answers will serve as a helpful resource to those who find themselves close to this situation.

Gerhard "Don't Need No Stinkin' Badges" Paseman, 2010.07.12