Knewton.com has claimed a lot of things and should have stayed in test prep. What they are now is a glorified ed publisher (basically, Pearson's technical arm) with crappy management but a lot of VC cash.

You're talking about a very hard problem. Something like Knewton will never replace human teachers.

And why is replacing human teachers desirable, anyway? If anyone succeeded at it (and no one will) it would probably be bad, on the whole, for society. If no one can make money teaching, the value of knowledge goes down. That would just lead to ignorance and bolster the already obnoxious anti-intellectualism of American society.