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.
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.
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.