There is an option for damage to effect driving, although you can't damage the car enough to become undriveable.
Some more moments of zen, as much as I want to play in cawkpit mode, I just performed so much better in 3rd person (which is odd...I usualy hate the 3rd person mode...car becomes to floaty). I think because I am now using an analog controller, and ive got an indicator of if I am going to fast for turns, I now have enough info to turn better now, and of course I can see farther down the road. Maybe when I get to know the tracks like the back of my hand, I can enjoy more cawkpit driving. I just opened up tier 4 and find that I need to retry a race once or twice to get the hang of it enough to win.
btw I suggest turning the sensitivity of your analog controls down to %6-%10. You will need the slight touches of the controls to maintain your car (jamming down the pedal in a turn is guarenteed to cause time loss and control loss now, you need to baby it).
Oh yea...DONT PLAY THE FIRST CAR BATTLE! Oh my god this is a painful track. If the pc dosn't get an irrecoverable lead on you in the first 30 seconds...he will get it on the last 5 seconds in which you do a 180 turn on a skate ramp with a huge bump that only the pc knows how to travel over at speed. Its a kick in the nuts when every other battle track in the tier is 1/3rd of the length and no tricks.
PC still cheats somewhat.. if you spend too much time treading stone/sand its over. Yet I will see the pc with 2 wheels off the road and lose very little or no speed. On the canyon map there was usualy one car that ended up in the edge of the road turning up a dust cloud for several yards and never lost position, something that you will find just dosn't happen. The stone and gravel here is pretty brutal.
And I swear the tunnel walls are magnetic!