I know there is radial deformation, at least there was in S1, haven't looked in S2 really.
Also, about the tire shaking back and forth over curbs and such, watch F1 sometime, where they get those super slow motion shots over the curbs. The tire deflects a lot for a split second, then shakes back and forth on the wheel until it hits the ground again. Granted, it doesn't deform as much as LFS would in that situation, but the effect is right at least.