The space news site SpaceFlightNow has an incredible article up right now about how, in December of 1988, not three years after the destruction of the Space Shuttle Challenger, NASA almost lost Atlantis. Holy crap. You have to read this article. Insulation from one of the solid rocket boosters fell and slammed into the orbiter's underside, damaging (it was found later) over 700 tiles along half the length of Atlantis! Yikes. Seriously, yikes. When the crew onboard did a camera check of the tiles, they found the damage and were obviously seriously concerned. They reported it to Mission Control, who looked at the video and said there was no cause for concern. Astronauts Mike Mullane and Robert Gibson knew better. In fact, they thought that re-entry might very well kill them. It didn't, but it was a near thing. One tile was totally gone, allowing the (non-vital) metal underneath it to partially melt. Never heard this story, have you? I'm not surprised. This Atlantis mission was blacked-out because it was done for the Department of Defense; the Shuttle was doing secret military work. This is a point of contention for many people, since NASA is a civilian agency, but there you go. The video the astronauts took of the orbiter's belly had to be encrypted and somewhat low-res, so ground controllers didn't get a good view of the damage... but they should have seen enough to raise alarms. Gibson didn't argue with ground control:

...the resolution on the encrypted video was that bad that [ground control] based a conclusion on it that was in gross error. ... If I had said hey, I think this is important enough for us to break the encryption and send you guys clear video, oh, it would have been pandemonium down there at DOD. But in hindsight, oh man, that's what we should have done.

In 1988 there was no safe haven on orbit for the Shuttle, so even if the orbiter were so damaged it would be destroyed on re-entry, not much could be done about it. I would think NASA would tell the astronauts if this were the case; there might be some things that can be done to maximize the safety of the crew's return -- changing the re-entry angle to take pressure off the damaged right wing comes to mind, though it's not clear how much that would help -- and talking to the astronauts is the only way to do that. So it looks like the people on the ground really thought the damage wasn't critical. As the whole world found out 15 years later, insulation hitting tiles can indeed be critical, when we lost Columbia in 2003. NASA is a big agency, and it has loads of innovative people, creative people, people who spend their whole lives dreaming of space exploration. But it is also a government agency, capable of incredible inertia and groupthink. I hope that the folks at NASA have learned these lessons well. In the next few years NASA may once again get the chance to have its reach exceed its grasp as it did during the magnificent Apollo era, and it would be a loss for everyone if bureaucracy and red tape were to shorten that reach.