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Played it a bit last night. I love the damage aspect of the game. It didn't seem to affect the performance but I'm wondering if that was turned off for the demo. Looks like it takes into consideration wear on tires and components so i'm assuming these will all affect performance over a longer race.
I have to say I like the more sim racing game over the arcadey ones, but PGR4 is looking pretty sweet too. I can't keep waiting for the next best thing so I'll be picking up Forza2 this month.
Now if they'd only bring the price down of the racing wheels.