I am building a small device with its own CPU (AVR Mega8) that is supposed to connect to a PC. Assuming that the physical connection and passing of bytes has been accomplished,
My vote is for the human readable.
But if you go binary, try to put a header byte at the beginning to mark the beginning of a packet. I've always had bad luck with serial protocols getting out of sync. The header byte allows the embedded system to re-sync with the PC. Also, add a checksum at the end.