The command \it has been deprecated in LaTeX2e; the recommended usage is now \itshape. Some packages, like the memoir class, do not allow \it to be used at all (along with \bf, \rm, and others). nuweb 1.56 currently typesets fragment names with \it; replacing these with \itshape seems to produce the same typeset output, but also works with memoir and other persnickety packages.
The fragment name seems to be written in three places in the source code; I changed each of the \it commands to \itshape, and my nuweb .tex files now run in memoir. The three lines in question are 2242, 2763, and 2838.