First off, that Mustang was perfect for KITT. Because KITT, in the original show was a normal looking car with a computer built into it. Lets face it, a car like a Mustang (or a Trans-Am at the time the original show was produced) is a lot less inconspicuous a vehicle to be driving around than a BMW or a Jaguar. A very expensive sports car would stand out if you were tailing a suspect. A run-of-the-mill Mustang, which is mass produced and can be seen multiple times in one day, doesn't stand out that much. Some of the missions that would most likely be encountered would require a stealth/low profile presence. Do you think a hulking Humvee or an expensive Ferrari counts as that? No. The original KITT also fit the stealth/low profile presence because he looked like a run-of-the-mill Trans-Am on the outside (with only one minor difference). Hell, there was a running gag in the show about it!
And second of all, it wasn't the third attempt. You forgot not only "Knight Rider 2010" (which started off as a true KR continuation in script, but became a TV movie which the only thing that had in common with the previous shows was a talking car. And a lot of fans don't seem to acknowledge its existence) and "Team Knight Rider." So the recent "Knight Rider" series counts as forth attempt at resurrecting the KR franchise.