> Why? Any set of 4 things also contains 2 things. Where's the nonsense? Within this definition, that's consistent.
That's the problem -- it's only within this definition. In other definitions, notable the nesting example that I gave, that theorem is false. And the theorem makes no sense in and of itself, because we're talking about numbers, so it is unexpected that the membership operator would apply at all.
Whereas I can take two definitions of the natural numbers
PN =
Peano_One: PN
Peano_Succ: PN -> PN
BN =
Binary_One: BN
Binary_2x: BN -> BN
Binary_2xp1: BN -> BN
and I can define a Plus: PN x PN -> PN and a Plus: BN x BN -> BN, and so on, and once I can define Binary_Succ: BN -> BN and Peano_2x and Peano_2xp1 I can prove that these are isometric types, so all theorems derivable from PN apply to BN and vice versa, not just the convenient theorems that don't use any syntax from the meta-language (e.g. set theory).