Please have a look here - http://en.wikipedia.org/wiki/Soviet_space_program#Incidents....
If the Soviets deemed it too risky for human pilots and managed to automate it 25 years ago maybe that should put it into perspective just how risky and reckless what Virgin are doing is.
One step at a time.
I think people should make that decision themselves.
I think at the moment, and into the foreseeable future, a human at the pilot seat for an experimental craft, where all sorts of unexpected scenarios could pop up, would be much better suited than an automated "test" pilot, given that sometimes you don't even necessarily have the correct parameters of your plane/rocket to program a successful autopilot.
Keep in mind that people at Virgin Galactic will have finite resources. Even if you can automate something that can access very unexpected situations and make a correct decision on what to do, the cost of doing that vs a test pilot is going to be much higher.
As far as I'm aware, aircraft autopilot systems do not perform well when unexpected mechanical failures occur and usually defer to humans by sounding alarms and such.
As for rockets, especially test ones, usually the automated system that makes a call when mechanical failures occur involves self destruct to prevent collateral damages.
"During the nine months since the previous rocket-powered test in January, Virgin Galactic switched SpaceShipTwo's fuel mixture from a rubber-based compound to a plastic-based mix"
[1]: http://webcache.googleusercontent.com/search?q=cache:JBrl96U...
For each of the technologies involved with the X-37, et al., that technology required testing with a human-in-the-loop to act as the judge for if the control output made sense. It simply isn't feasible to begin testing your robot pilot without first testing it with a pilot there in the first place.
Where is the line?
But I get what you mean. It's a tough thing to figure out, and hindsight is always going to be "well we shouldn't have done that".
I find it absolutely reckless and inexcusable to require live humans riding on a prototype rocket when you have all the processing power needed to automate/remote manage the vehicle literally in your pocket.
EDIT: To those downvoting, you should really check that all current spaceplanes have the capability to fly and land autonomously--Boeing X-37, Dream Chaser, even Buran was fully autonomous and that was 25 years ago. There is simply no excuse for Virgin for being sloppy.