Despite it's entertainment value, there is nothing in the passage which supports the belief that the brain is a computer (or even a "meat computer") or demonstrates why the analogy of brain as computer is logically different from brain as mill. That's not to say that the complexity of a computer may not create a more attractive analogy, but one must keep in mind that no matter attractive Camelot appears on screen, it's only a model.

You quoted a statement Leibniz made about 300 years before Turing proved that there are machines that can compute everything that is computable. I and others explained in comments below, why we have reason to believe, that computers are fundamentally different from mills and that Leibniz's argument as well as Searle's fall flat. By the way, it is not the necessarily the "complexity of a computer that may create a more attractive analogy". The physical parts of computers can be less complex than those of mills. I wonder how Leibniz would have reacted if he had been shown Google. Would he have believed, for example, that the essence for its face recognition software must be "sought in simple substance"?

For more rebuttals of the Chinese Room argument see its Wikipedia page. I like this one in particular: A guy sits in a room and waves a magnet up and down therefore creating electromagnetic waves. But you don't see light coming out. So light cannot possibly be electromagnetic waves.

Whenever I see an argument about we fully knowing how brains work, I remember some Turing-Gödel stuff that says that we would need much bigger brains to really do that. And the big brains will only be able to get an answer about smaller brains, not about themselves.

So, any final answer about our brains requires far more computing power, in whatever form (mechanical or biological or whatever) than we have now.

Or haunted beef: http://www.warrenellis.com/?p=12765

But Leibniz (unlike Searle, who is pretty inconsistent on this point, apparently) isn't denying or overlooking the similarity between the idea of "sentient meat" and that of sentient mill mechanisms. It's precisely the basis of his argument.

Could you explain a bit?

This is how I understood the argument: Parts can’t form machines which perceive (I couldn’t find a justification for this assumption – that’s the sticking point), therefore perception is not created by parts but by a substance.

The meat comment targets the first part of the argument. Leibniz seems to make an assumption (parts can’t from perceiving machines ≈ meat can’t think) which he doesn’t really justify.

I thought he was using the mill as an example to show that perceiving machines made from parts are self-evidently absurd, to ridicule the idea of perceiving (or conscious) machines. What am I missing?

Yet another dead/hidden comment that shouldn't be: http://news.ycombinator.com/item?id=2598559 by brudgers. Here's the text:

Keep in mind that the analogy of the mill is only one element in support of Leibnitz's central argument in the Monadology. A crude outline:

    Perception exits. 
    Perception cannot be found in the parts. 
    Therefore there must be something else. 
    To avoid the same problem the something else
    must not be composed of parts.
    Therefore a simple substance [the monad] which 
    perceives must exist.

What the passage from Leibnitz suggests is that the step from drawing an analogy using most sophisticated technology of the day as representative of the brain to the belief that the brain is the technology is not unique to the invention of computers.