Can siRNA induce DNA methylation in mammalian cells?
From a brief survey of the literature, it seems Kawasaki and Taira have been largely vindicated by the community before and since their paper. The retraction was by Taira alone, Kawasaki refused to co-sign because he maintained the data were valid. From the retraction it seems the reason for the retraction was a lost lab book.

Prior to the Kawasaki and Taiga paper, there were already several other papers describing RNAi-induced epigenetic modification in mammals:


Castanotto, D., Tommasi, S., Li, M., Li, H., Yanow, S., Pfeifer, G.P. &amp; Rossi, J.J. (2005) Short hairpin RNA-directed cytosine (CpG) methylation of the RASSF1A gene promoter in HeLa cells. Mol Ther. 12 (1), 179–183.
Morris, K.V., Chan, S.W.-L., Jacobsen, S.E. &amp; Looney, D.J. (2004) Small Interfering RNA-Induced Transcriptional Gene Silencing in Human Cells. Science. [Online] 305 (5688), 1289 –1292.


Then there was another paper the next year by Kawasaki &amp; Taira, which was not retracted:


Kawasaki, H. &amp; Taira, K. (2005) siRNA Induced Transcriptional Gene Silencing in Mammalian Cells. Cell Cycle. [Online] 4 (3), 442–448. 


And it seems the idea is now generally accepted and supported by quite a few other studies, mainly looking at germline cells. For example:


Carmell, M.A., Girard, A., Kant, H.J.G. van de, Bourc’his, D., Bestor, T.H., Rooij, D.G. de &amp; Hannon, G.J. (2007) MIWI2 Is Essential for Spermatogenesis and Repression of Transposons in the Mouse Male Germline. Developmental Cell. [Online] 12 (4), 503–514.


There is no review that I could find which really ties it all together convincingly, but there are several reviews on RNAi directed histone and chromatin modification in general which mention that the fact is now established in mammals:


Joshua-Tor, L. &amp; Hannon, G.J. (2010) Ancestral Roles of Small RNAs: An Ago-Centric Perspective. Cold Spring Harbor Perspectives in Biology.
Volpe, T. &amp; Martienssen, R.A. (2011) RNA Interference and Heterochromatin Assembly. Cold Spring Harbor Perspectives in Biology. 3 (9).