Google's algorithm (which Strum seems to be pollinating everywhere -- and good, because the old algorithms were failing DARPA tests) is to pre-map the road. The car knows exactly where it is and what is supposed to be there, which it also compared with what it sees now.

How will it react to a bicyclist running a red stoplight and into the car's path, when the car has a green light?

It will stop. In fact, the "failure mode" of self-driving cars will be how pedestrians can bully them by stepping in front of them so they stop.

When the car comes across kids playing football/street hockey/baseball in the street, will it stop for them?

There is already video of this. The radar/lidar isn't good enough to see a baseball, but it's definitely good enough to see a kid.

Will these cars have systems to react when they take damage?

It will probably pull over and stop if something is wrong.

Interesting case here for carjackers. You're Google car probably won't floor it in the middle of the night through a red light when an armed gang approaches your car. Then again I guess that's what "manual" is for.

Carjacking a car loaded with recording equipment that probably phones home with GPS and other environmental data probably isn't the best idea.

carjackers aren't known for their brilliance

Yes, a Google autonomous car drove down Lombard Street: http://googleblog.blogspot.com/2010/10/what-were-driving-at....

Here you can see video of self-driving cars handling Lombard Street, as well as dirt roads, off-road driving, pedestrians and bicyclists and other obstacles in the road, plus tons of information about how they work:

https://www.ai-class.com/course/video/videolecture/48

https://www.ai-class.com/course/video/videolecture/209

https://www.ai-class.com/course/video/videolecture/210 (Lombard Street at about 4:40)

One thing that strikes me is how much more these robots can potentially see than a human driver. Imagine how much better you could drive if you could see in all directions at once with multiple range-finding sensors and cameras, track dozens of moving objects simultaneously, never get sleepy or look away from the road at the wrong time, react to events in milliseconds, and learn from hundreds of thousands of miles of training data as your driving "experience".

Everything you've just said would have come up in numerous meetings before they even started planning how the system would work.

I guess another good question is: "how well do humans handle these things?"

I think the answer is: "not very well."

The original DARPA Grand Challenge was set in the desert on dirt roads. It's not that difficult to identify the road given some assumptions about how roads work (e.g., it's likely to be a slightly different color or texture)