There are solutions to your proposed problem. You could require the car be taken into a shop for updates. This would make the update gradual (so the eggs are never all in one basket) and it would let mechanics ensure the update was applied correctly. You could also design the software to have a core that is never updated. It would monitor basic things like "Am I going too fast?" "Can I brake in time for any obstacles?" etc. Google uses this strategy IIRC.
Even better, the more software and chips there are in your car the "better" the bugs get. Friends of mine had fun problems with a new Audi A5: about 10 times, it randomly turned off while driving taking about 20 seconds to come back, and handling a car with power-steering with the engine off is very hard! AFAIK, that problem hasn't been solved yet.
I've googled around a bit and here's someone with an 2000 Audi TT that just randomly turns off because the engine speed sensor broke: http://www.audiforums.com/forum/audi-tt-7/help-2000-tt-rando...
Making self-driving cars safe isn't an unsolvable problem: we do this already for planes.
Cars on the other hand need to do much more than that. The process of automatically determining where the road actually is, is not trivial by itself. Cars also need to handle other unpredictable factors to a much higher degree; other manually driven cars, bicycles, pedestrians to name a few. Not to mention road obstacles, and animals (in my country moose collisions are common, and deadly).
It always fascinates me that this argument comes up from the negative side of self-driving cars pretty much every time, but it's actually the poster-child reason self-driving cars are better.
A self-driving car is at least as likely to recognize a potential collision with a moose as a human is (given current sensor tech) and probably much more so since it can't be distracted.
The advantage of a full omnidirectional sensor array is that it can pay attention to the kid on the bike, the moose crossing the street, the 5 cars around you, the alien spaceship in the sky, and the kid using your bumper to accelerate his skateboard all at once (or at least in timeslices small enough to count as such). You can only pay attention to a couple of those things.
Although, I have no real knowledge of either.
They will, however, notice that their car doesn't have a steering wheel any more.
When the target gets big enough, it will happen. And how to protect against this, when we don't really understand the weaknesses yet - a rogue radar/lidar imitator sending false echoes, strong EM fields messing with electronic components - it could even be an intermittent connection fault in a communications bus. Plenty of unknown unknowns in this field.
What makes you think that updating your driving software will be like installing iOS 7?
[1] http://en.wikipedia.org/wiki/List_of_motor_vehicle_deaths_in...
Once someone starts selling these things, insurance for city drivers who insist on driving themselves will skyrocket.
But yeah, testing is going to need to be very rigorous to make sure there are no regressions.
Even with all these advantages, some automated vehicles will crash and kill their occupants. Some will even kill pedestrians, and sometimes this will be due to software error.
But humans do this already, and we do it so often that it doesn't even get on the news. Around 1.2 million people die in traffic accidents each year. That's just over 2% of all deaths[1]. Unless the automated vehicles of the future are orders of magnitude worse than current ones, switching to them will save millions of lives and prevent tens of millions of injuries.
It's sad that bureaucracy and human irrationality cause so much unnecessary death and suffering.
1. http://en.wikipedia.org/wiki/Epidemiology_of_motor_vehicle_c...