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Its worth pointing out that Prof. Missy Cummings, who authored the paper, is a former F/A-18 pilot who specializes in human-machine interaction research.

One option is the Tesla autopilot should have an indication when it approaches "low confidence" areas without disengaging, so the driver is not startled if they have to take back manual control.

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The Mercedes E-Class Drive Pilot seems to do this to some extent. For example even going from demanding the driver to place one hand on the steering wheel to requiring both hands.

https://youtu.be/Pq5LDi3-ChU?t=40m5s

Yep. I saw her speak at an event a couple years ago. She's also done a fair bit of research around humans splitting their attention across multiple vehicles--mostly drones.

I agree there can be handoffs but they mostly need to be in the vein of: I'm slowing down and turning over control in 30 seconds because there's something I don't understand coming up

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