Plot hole: At the end of the episode, KITT has to travel about 45 miles in under 8 minutes. That means KITT would have to travel a little under 360 mph for the entire time. KITT couldn't travel that fast until season 4 when he got Super Pursuit Mode, and we never see the speedometer read that high even once.
Lost Knight - S3-E10
Plot hole: The explosion strength of the XPL nitro-plastiqe is very inconsistent. In the opening scenes, six cubes are enough bring down a building. Later, Bobby throws two cubes of it out the passenger window. Oddly, they end up on opposite sides of KITT, and then cause only very minor explosions. In the next scene, Bobby throws the another two cubes of explosive out the window, and those explosions are enough to collapse a power pylon. (00:08:26 - 00:08:49)
Lost Knight - S3-E10
Plot hole: KITT loses his memory of Michael and Bonny gives Michael a new memory to replace his damaged one. Now this is a back up version and improved memory. But after the old backup is restored, KITT still knows who the boy is, despite meeting the boy after that backup would have been taken.
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"