I am currently experiencing a nasty encounter with Fail Safe as well. I installed the C&L CAI with Predator tune about 3 weeks ago without any problems. Immediately noticed the improved throttle response like everybody else has but was disappointed that I would still randomly get the throttle surge and\or hesitation problem some have reported here as well. One thing to note, on one thread somebody mentioned how they "calibrated" the throttle by having the key on, engine not started, and slowly depressed the accelerator to the floor for about a second duration. I only did it once, but I never encountered the surging problem again. Ok, off topic a bit, but here's the "rest of the story".
Last Friday, with no prior symptoms displayed, I jumped in the car to run an errand and could hardly get it started. After repeated try's I was finally able to, but in Fail Safe Mode. I turned it off, waited, restarted, same result. This was done more than once. The smell of gas was very strong and black smoke to boot.
Plugging in the Predator and going to the Dianostics mode, it indicated one Unknown error and two errors for the O2 status sensor "locked, burning rich", both banks. Thinking I may have a system glitch or stuck bit, I reflashed the computer with the performance tune. No change. I then disconnected the negative cable for the battery for about 30 minutes; reconnected, attempted to start, still no change. Lastly, I pulled off the C&L, reinstalled the factory air box, restored the original Ford program...NO CHANGE! Didn't know what else I could do at this point, so brought it to the dealership this AM on the back of a tow truck. Let me tell you, nobody wants to see the joy of their life on the back of a tow truck! It killed me!
Haven't heard from the dealership yet, but have a pretty good relationship with them so hopefully they will get it figured out ASAP.
Btw, I bought my 5 speed GT on December 3, 2004. I now have over 39K miles on it. The only other mods I have done to it are FRPP Strut tower brace and coil springs, and Saleen short throw adapter.
Anybody else out there have a similar experience?