I think Vorlon's update that a party can request county specific hand recounts is a state rule that pre-dates Bush vs Gore. I think that decision would demand a state-wide hand recount with the same standards in every county.
So, when does the iterative recounting end. I mean, if the hand count gives Rossi a 5 vote win, does Gregoire pay for a "more careful" hand recount? I understand that a machine recount is not as thorough as a hand recount, but (1) King County, at least, hand counted all the machine rejects and (2), if the ballots that the machines do accept and count are meaningful, then only the rejected ballots should be counted by hand. To do otherwise implies that the machine counts are inaccurate; hence, they should never be used.
I'd suppose it is like machines that read standardized tests - they can't see things such as blue ink. There's no better machine. It's a small number of ballots, but here it matters.