Most games already have a option to choose how hard or easy you want your game. This works better than autoleveling, because If I set the game to be hard, and I die too much, maybe thats exactly what I want, and If set game too easy and I kill everything, maybe thats what I want.
I couldn't agree more. There seems to be continuing trend in game design towards making games where the player is never frustrated. The way I interpret this, we're headed towards the philosophy of "don't make the game too hard, and if the player is still having trouble, make it even easier by dynamically adjusting the difficulty."
Now obviously for some people that's great. If you're a casual gamer, you still want to be able to play through games without getting stuck on the first level. However, I think there's a real hole in the market right now for games that cater to hardcore gamers. Personally, I like games that are a little bit frustrating, because it means I'm being challenged. I don't want to play an interactive movie, I want to play a game.
There are signs that this might be changing (Demon's Souls is a good example of a game that bucks the trend and does so in a very compelling way), but I think one of the big reasons that multiplayer games are so popular nowadays is simply that real players provide a genuine challenge to play against.