Automatic digitizing often gets a bad rep, partly because most people that have been digitizing for years know that it can't be all things to all people, and this is true. It can however allow the novice to start digitizing perfectly acceptable designs, while they are learning the more advanced nuances of manually digitizing.
The key to digitizing automatically is to start out with good artwork. If you need to make changes to that artwork you can do this within the auto-digitizing process, before you translate the design into embroidery, or after the design has been converted to embroidery using the shape editor. You can also make adjustments to the automatic density, pull compensation and underlay settings.
Automatic digitizing is a very powerfull tool and one that I encourage you to use, but I also suggest that you preview the resulting design and makev sure there are no adjustments to be made before you sew out your final embroidery.

Before you start digitizing a design, whether it is automatically, semi-automatically or manually, you can go to the general options menu item in, KPD Compositions, which is located under the tools heading and choose the fabric type that you will be digitizing for. This will set up the proper density, pull comensation and underlay type or types that are most appropriate for this particular design. While this is a time saving device for experienced digitizers, it is a godsend for novices as it pretty much elliminattes the need to understand the relationship between the digitized design and the quality of the finished embroidery. The more you digitize the more you will learn about what settings work for a particular fabric and which don't and you can become more and more involved with the digitizing settings and eventually defining your own unique digitizing style.

We all have our favorite settings for creating lettering for differnet situations. For small lettering I like to decrease the density to 45 SPI and to add a single perpendicular running stitch as the underlay. For large lettering on a towel I like to use density of 65 SPI and a crosshatch underlay. You get the idea, and I am sure that you all have your own list of perfect combinations of settings that work just right for you. When you are creating your lettering using KPD Compositions you can save an unlimited amount of lettering styles, so that you can quickly and automatically call up the most perfect and personalized settings for the particular type of lettering you need.