There is some fragmentation if by fragmentation you mean there are implementation details that differ enough on different phones that you have to code around them. For example, phones running Android versions before 2.0 did not support multi-touch, and phones running 2.0 and later do. Also, even among the phones that do support it, some are buggy and give you strange touch-points that didn't really happen that you have to filter out.
By and large, though, developers can write a single program that runs on all or nearly all Android devices on the market. In this sense, Android has little or no fragmentation. Either way, it's better than J2ME ever was.
He seems to mean this primarily in terms of compliance with the official Java specification
Unfortunately Sun (now Oracle) does not allow Apache to get an official copy of the test suite for that compliance, so they've set it up so that the Apache Harmony classlibs (used by Android) can't possibly be compliant. According to Nutter, the patents are worded so that you have to infringe them if you want to be compatible with existing Java code. But if your implementation is not compliant then you can't get patent protection. And if you can't get patent protection you get sued. That doesn't seem fair.
3. Wait for them to actually succeed, and invest time. money and creativity in creating something useful that's loosely based on your half-baked idea that you patented
This is one of the most insidious parts of the current system. Under a strict interpretation of the current patent law, there are are uncountable number of patent infringements lurking in just about every significant product on the market right now. So not only is it a mine field, and not only do you have to walk through it every day, but you can't rely on seeing 3 people in front of you step on a spot of ground to know it's safe.
Mr. Cole's Axiom: The sum of the intelligence on the planet is a constant; the population is growing.