Google is at stage 3 and getting close to stage 4 for slow (< 25MPH) vehicles. See Urmson's talk at SXSW, where he shows Google cars handling many unusual situations. (A woman in a powered wheelchair chasing a turkey with a broom is one example.) If you're willing to drive slow, more situations can be handled. It's not necessary to have as much sensor range, situations are less ambiguous, braking hard will resolve most problems, and predicting what's going to happen becomes less important.

At higher speeds, prediction becomes more of an issue. Will that car on the side street drive into the intersection, or not? At slow speeds, you can wait and see what they do. At higher speeds, you have to predict behavior. That's hard, but a machine learning problem.