Plan processed a lump sum cash distribution (eligible for a rollover) but did not withhold 20% mandatory taxes. 1099-R reflects no taxes withheld. How should plan correct?

you did not state when distribution occurred.
apparently in 2005, you can not change the tax reporting nor the consequences. Should the participant rollover the entire amount then there will be no impact to the participant's personal return, in effect no harm no foul.

Should the participant not rollover the entire amount, the issue will be if the participant has paid the entire tax liability again, in effect no harm no foul.

This does not resolve the exposure to liability for the Plan. What entity failed to do the withholding, the Trustee, or the Third party administrator. The Plan and the Plan Sponsor should look to them for indemnity; further the Plan and its Trustees need to review its operations to ensure that such lapses do not occur in the future.

Distribution occurred Dec 2005. This is a one man plan. Trustee/participant received general info from CPA that "you are over 59 1/2, therefore you can take money from your plan"

Can this just be run through his taxes and be sure it doesn't happen again?

Yes, just pay the taxes with the 1040 filing.

Agreed. If I remember correctly, I believe the IRS's position is if the participant doesn't end up paying his taxes, they will come after the plan sponsor for the 20% they failed to withhold.