We have
$$ \sqrt{1+\sqrt{z}} = \sqrt{2}\left(1+\sum_{n=1}^\infty \frac{(-1)^{n-1}}{16^n n}\binom{4n - 2}{2n-1} (z-1)^n\right) $$
Here is a very general method, in the particular case of an algebraic function, to prove the identity.
I — Notations
Let $f$ be the function $z \mapsto \sqrt{1+\sqrt{1+z}}/\sqrt 2$, which is holomorphic in a neighbourhood of zero. We take a determination of the square root holomorphic around 1 and such that $\sqrt 1 = 1$. Note that in order to simply the computation, I shifted the variable and normalized the value at zero.
II — Algebraic equation
The function $f$ obviously satisfies the algebraic equation
$$ (f(z)^2 - 1/2)^2 = \frac{1+z}{4}, $$
or, equivalently, $P(f(z), z) = 0$, where
$$ P(Y, z) = 4Y^4 - 4Y^2 -z. $$
III — Differential equation
The function $f$ satisfies the following linear differential equation :
$$ 16 z (z+1) f''(z) + 8(1+2z) f'(z) - f(z) = 0 $$
This is a general fact that an algebraic function satisfies a linear differential equation with polynomial coefficient.
IV — Recurrence
Write $f(z) = \sum_{n\geqslant 0} u_n z^n$. Thus
$$ 16 z (z+1) f''(z) + 8(1+2z) f'(z) - f(z) = 16n(n-1)u_n + 16 (n+1)n u_{n+1} + 8 (n+1) u_{n+1} + 16 n u_n - u_n $$
which implies that
$$ (4 n - 1)(4n+1)u_n + 8(n+1)(2n+1)u_{n+1} = 0. $$
V — Resolution
We check easily that the sequence defined by
$$v_n = \frac{(-1)^{n-1}}{16^n n}\binom{4n - 2}{2n-1}$$
if $n>0$ and $v_0 = 1$
satisfies the first order recurrence above. Since $u_0 = 1 = v_0$, we can conclude that
$$u_n = v_n$$
VI — Automation
Here is a Maple session showing how to automate the proof of steps II to V.
> with(gfun):
> f := sqrt(1+sqrt(1+z))/sqrt(2);
1/2 1/2 1/2
(1 + (1 + z) ) 2
f := ------------------------
2
> holexprtodiffeq(f, y(z));
/ 2 \
/d \ 2 |d |
{-y(z) + (8 + 16 z) |-- y(z)| + (16 z + 16 z) |--- y(z)|, y(0) = 1}
\dz / | 2 |
\dz /
> diffeqtorec(%, y(z), u(n));
2 2
{(-1 + 16 n ) u(n) + (24 n + 8 + 16 n ) u(n + 1), u(0) = 1}
> rsolve(%, u(n));
n
GAMMA(2 n - 1/2) (-1)
-1/2 ----------------------
1/2
Pi GAMMA(2 n + 1)
You have to use the duplication formula for $\Gamma$ to retrieve the binomial coefficient.