<p><strong>Has anyone had success automating testing directly on embedded hardware?</strong></p>

<p>Specifically, I am thinking of automating a battery of unit tests for hardware layer modules. We need to have greater confidence in our hardware layer code. A lot of our projects use interrupt driven timers, ADCs, serial io, serial SPI devices (flash memory) etc..</p>

<p><strong>Is this even worth the effort?</strong></p>

<p>We typically target:</p>

<p>Processor: 8 or 16 bit microcontrollers (some DSP stuff)<br>
Language: C (sometimes c++).  </p>

Sure.  In the automotive industry we use $100,000 custom built testers for each new product to verify the hardware and software are operating correctly.
The developers, however, also build a cheaper (sub $1,000) tester that includes a bunch of USB I/O, A/D, PWM in/out, etc and either use scripting on the workstation, or purpose built HIL/SIL test software such as MxVDev.
Hardware in the Loop (HIL) testing is probably what you mean, and it simply involves some USB hardware I/O connected to the I/O of your device, with software on the computer running tests against it.
Whether it's worth it depends.
In the high reliability industry (airplane, automotive, etc) the customer specifies very extensive hardware testing, so you have to have it just to get the bid.
In the consumer industry, with non complex projects it's usually not worth it.
With any project where there's more than a few programmers involved, though, it's
really
nice to have a nightly regression test run on the hardware - it's hard to correctly simulate the hardware to the degree needed to satisfy yourself that the software testing is enough.
The testing then shows immediately when a problem has entered the build.
Generally you perform both black box and white box testing - you have diagnostic code running on the device that allows you to spy on signals and memory in the hardware (which might just be a debugger, or might be code you wrote that reacts to messages on a bus, for instance).  This would be white box testing where you can see what's happening internally (and even cause some things to happen, such as critical memory errors which can't be tested without introducing the error yourself).
We also run a bunch of 'black box' tests where the diagnostic path is ignored and only the I/O is stimulated/read.
For a much cheaper setup, you can get $100 microcontroller boards with USB and/or ethernet (such as the Atmel UC3 family) which you can connect to your device and run basic testing.
It's especially useful for product maintenance - when the project is done, store a few working boards, the tester, and a complete set of software on CD.  When you need to make a modification or debug a problem, it's easy to set it all back up and work on it with some knowledge (after testing) that the major functionality was not affected by your changes.
-Adam