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can't they just turn whatever is holding the tether in place on the ground?

sure, but you can't turn the actual wire itself indefinitely or it will shear eventually

The twisting is what transfers the energy, it must be turning a generator.

According to their video, little turbines in the wing generate the electricity and transmit it through the tether. So probably the tether is attached to a ground unit that doesnt allow twisting (i.e rotates with the tether)

http://i.imgur.com/UoEfnyW.png?1

Yeah, that's correct, and makes more sense. They do have a page explaining the tech: http://www.makanipower.com/how-does-it-work/

tie the tether to something that can spin in opposition to the twist (a wheel or a gimbal).

sure, but you can't turn the actual wire itself indefinitely or it will shear eventually

You can just use a slip ring[1] at one or both ends (along with a whole bunch of axial thrust bearings, I imagine).

There are some neat (and very non-RoHS) slip ring implementations that use a series of liquid mercury filled channels to sidestep the brush wear issue, but I don't know that would be useful here, based on rotation speeds.

[1] https://en.wikipedia.org/wiki/Slip_ring