Totally depends on what you want to see. If you're primarily interested in the cities and big sightseeing sites, you're better off going via train with a Rail Pass. It's also better to do the train if you're a nervous or inexperienced driver in varying terrains. Disadvantages of trains are you lose some spontenaeity to just stop, pull over and take a pictures or explore an area more in depth. Train stations can be unsafe from a pick pocket standpoint, so watch your stuff in major train stations.
Cars are better if you are primarily interested in rural sites and/or are taking a lot of gear with you. The disadvantage of a car in Europe is cost of gas (it's can be around $5/gallon in Europe), difficulty to find parking and you need to be a confident driver. It's not just about being able to control a car on the autobahn, it's more about driving in very tight spaces (in some towns you have to fold the rear view mirrors in to make it down some streets).
I've been lost many times in rural Europe and have found the locals to be incredibly helpful and kind. Being lost on foot in a major city you're more likely to meet jerks than you are in the middle of nowhere. Incidnetally, I've been lost in Umbria Italy, Andalucia Spain, Yorkshire and Morocco. All relatively rural areas..being lost was the best experience!
Economically speaking, check out a rail/drive package with EurRail. It gives you a rail pass plus vouchers to rent a car. That way you can take the train between countries and major cities and then rent a car if there's someplace rural you would like to go. Most places in guidebooks are serviced by some form of public transport.
Do your research, that's the most important thing.