I don't think the "I'm watching this" protects anyone's account. I don't mind getting soft banned. All you have to do is change the bot to "loot pokestops" only and after about 35 attempts of the bot trying to loot a pokestop, it overrides the ban and you are no longer soft banned. That's a whole lot easier than having to wait for 12 hours.
And what if you can get pokestops just fine and only unable to catch Pokemon which is what was happening to a lot of people? I think the idea is, if you couldn't catch pokemon while playing legit you wouldn't play. You wouldn't go around just picking up pokestops for fun if you can't catch pokemon. And if you got banned while afk rather than the bot constantly keep trying to catch pokemon allowing them to free while collecting all the pokestops, it stops the bot and tells you to wait out the ban. I like that as it no longer looks obvious. If Niantic looked through their logs and saw the history for one account has say 150 pokemon that have fled from a trainer in a row they will know for sure that player is botting. Not sure if I've explained that all too well, hopefully you get what I mean.
I have been banned about 20 times for botting. I authentically upgraded my account until about level 22 and just learned about botting a week ago. I'm level 27 now, almost 28. I have never been banned to where I was able to loot pokestops, but not catch pokemon. I haven't even heard of that being a problem. And, if more than three pokemon flee, I myself can see I am banned, change the setting, and fix the problem myself. We didn't need an update to address what the average person can fix themselves.
If you see it, then yes you can change it, though the bot is designed to be run while afk. I set the bot going last night to run over night. About 3 hours before I woke up I got the 12 hour ban. So for 3 hours my account was running around Sydney, Australia (I'm from the UK) collecting pokestops and trying to catch pokemon but they kept fleeing. If this 3 strikes feature had been installed last night my account would have logged out due to the bot shutting it's self down which would be better in all honesty. It looks less suspicious.
Until the fire dies down I'd highly suggest you bot only close to home at low speeds, walking or jogging and keep an eye on the bot. If you get soft banned were pokestops don't work then use pokespinner or nox to unban your self but if you're doing something to cause a soft ban in the first place I'd recommend drawing less attention to your self by a) not doing what ever it is that caused it and b) not unbanning your self quickly as again that's going to draw attention to you from Niantic if they look through logs.