About 1% of software updates fail, leaving behind a corrupted iTerm2 installation. To figure this out, I've added a bunch of logging to the code that does the update. Since I can't reproduce this bug myself, I need lots of people to force an update and if the bug shows itself, to send me the logs. It's easy:
  1. Download the experimental build
  2. Unzip it and put the app wherever your iTerm.app normally lives (e.g., /Applications or whatever).
  3. Run it.
  4. Run /Applications/Utilities/Console.app
  5. In Console.app, click the "Clear Display" at the top left.
  6. Back in iTerm, select the iTerm>Check for update... menu item,
  7. It should find an update. Click "install update".
  8. After it finishes downloading, click "install and relaunch".
At this point, one of two things will happen.

iTerm restarts and works fine

Your job is done here. Thanks for trying.

iTerm doesn't restart and it can't be started by double-clicking its icon either

Yay! You hit the bug.
Go back to Console.app and choose File>Save a copy as... and send me the file. You can email it to itermcrashes@georgester.com or tweet me a link to a gist (or whatever else you think is most convenient).
Delete the messed up directory and download again from iterm2.com to fix your busted install.
Thanks for your help!
-George