Here are some options I think would be useful in Auto DJ.
You should be able to use these together with the last.fm similar artist options.
1. Don't play the same artist more than every ___ track
2. Prefer higher rated tracks
3. To avoid that the playlist generation stops because no matches are found, the Auto-DJ could go back to a previous seed until a match is found.
If no previous seeds are available it could lower the % similar value until a match is found. After finding a match the % value should be restored for the next track selection.