Other mistake: As KITT has the guy pinned by the fence, asking questions, the passenger mirror is angled out in an impossible angle so there is no reflection.
Continuity mistake: When Michael is evading the earth movers you can clearly see his left hand at the 12 o'clock position on a normal round steering wheel, rather than the aircraft-like yoke. (00:12:38)
Answer: KITT didn't choose to go off the cliff in Goliath Returns, it just happened as he tried to avoid Goliath. Just 'cus it happened, doesn't mean It's gonna cure his fear of "flying"