I'd tend to think that the reason 'manual check-in' failed is because the procedure was designed way back in the early days - when connecting flights were 'rare' or virtually 'non-existent'. As the company has grown, many of its back up plans have become obsolete.
This is a clear indicator that the company has not grown in proportion to its market share.
Manual check-in works well when it's point to point - but markedly less so when connecting flights are involved.
This seems to be a latent failure on the part of Virgin Blue - regardless of who provides its soft or hard ware.
Every pilot, engineer, and flight attendant out there should take this as a solid reminder - if anything goes wrong, the company will do its best to pass the blame.