Continuity mistake: When Pepper is watching the television program about Stark Industries' stock troubles, after Tony's press conference, notice she has a wireless headset in her left ear. When Tony calls her down to the lab, the camera flashes back to Pepper and the ear piece is gone.
Visible crew/equipment: In the extra footage after the credits, the reflection of the crew is visible in the picture frames around the apartment.
Continuity mistake: When we first see Tony Stark arrive at the benefit, his car doesn't have a front plate. When we actually see him pull up to the entrance though, his personalised "Stark" plate has appeared.
Continuity mistake: After flight testing the suit the first time, Tony crashes through his house, landing on and partly crushing his blue Cobra roadster, as building debris litters the ground around and on the car. Later, when Pepper finds Tony being fitted by robotic arms, we see the same garage area in the background and the Cobra and debris have been cleared away, replaced by the 1932 Ford hot rod. Still later, when Tony suits up for the final battle, the damaged Cobra and all the debris is back in place in time for him to shove the car out of the way. Note the same location in all three shots is below the second set of windows on the wall.
Continuity mistake: In the montage of Stark designing the Mark II suit on his computer, he picks up a coffee mug to his left and absent-mindedly drinks it, then gets a not-good expression as the liquid was presumably not what he was expecting. A second earlier, the coffee mug had been shown completely upside-down on the desk.
Revealing mistake: Some of the shots involving the terrorists firing at the prototype suit are "flipped" duplicates of other shots. In the scene where he first emerges from the cave, several of the terrorists are firing M4-type rifles with the ejection port on the LEFT side of the rifle. In reality, except for a few specially made versions, all M4-types eject spent brass through an ejection port on the right. Later in the scene, this shot is repeated, but with the proper orientation.
Other mistake: When Tony's convoy was ambushed at the beginning of the movie he was riding in an non-armored HMMWV. Prior to 2007, all vehicles that leave the base are uparmored in Iraq and Afghanistan, under no circumstances do you leave base in a soft vehicle. The Airmen were wearing the Airman Battle Uniform, which was released for use in the Middle East around 2007, so the movie couldn't have taken place prior to that time period. Some people may try to correct this by claiming that the military doesn't have enough uparmored vehicles to go around and they just got the short end of the stick. That is not the case today like it was a few years ago. Even if it was the case, the military wouldn't put a passenger who would be considered a "high value target" to the enemy like Tony at risk for capture or death in a soft vehicle, especially with his knowledge of weapon systems that can be used against the US.
Continuity mistake: When Tony Stark is at home he's wearing a black tank top while working on the suit, and there is a bad cover-up of one of his tattoos. It almost looks like a band-aid is over it. It goes away and comes back.
Audio problem: When Pepper runs out of the Stark Industries building and says "Obadiah, he's gone insane", her lips don't match with her mouth.
Audio problem: When Tony is breaking down the test run to Jarvis, a note-perfect transcript of what they say appears on the screen in the right corner. But when Jarvis says "Shall I render using proposed specifications?" the screen says "Shall I render utilizing proposed specifications?" Also the words that Tony says appear on screen before he says them.
Continuity mistake: When Tony is paralysed on the couch, in one shot his head is facing to the left. However, in the very next shot he is facing forward and slightly slouching back a bit. There wasn't enough time for him to move into the other position, even if he wasn't paralysed.
Continuity mistake: When the pilot ejects as he is falling, up close he is trying to pull the eject handle, but when it zooms out his arms are out to the side.
Continuity mistake: In the scene where Tony Stark is in the cave building his mini arc reactor He tells the Dr. what it is, then the scene cuts to Tony laying down the papers for the Mark 1 and you can see the glow of the arc reactor in his chest. Immediately after that the scene cuts to the terrorists tv monitor and seeing the Dr. putting in the new arc reactor.
Factual error: After Tony demonstrates the Jericho for the first time, the aftershock hits the soldiers in the face and blows at least three people's hats off. From the side shot of the event, happening simultaneously, you can only see one hat being blown into the air. The aftershock also makes a dead stop, weakening too quickly and appearing anti-climactic. The aftershock should have blown at least ten yards more before dying out.