My short review after 1h or so of gaming.
Physics:
What can I say: Fantastic. The physics are great for a console game, heck, they are great overall! It really is a top notch job. I love it, you can feel the car getting light and loose when entering at high speeds into a corner. There oversteer/understeer, the brakes lock up, the car is not too grippy and can definately get sideways if you are not careful. Playing on Expert (With auto clutch), the game is great fun.
Graphics:
Do I need to say anything here? Amazing. The cockpit is outstanding. There is something about other console racing games (Shift/Dirt 2) and their cockpits that just makes me dislike them. But I love it in Forza 3. Just adds a little bit more adrenaline and immersion into the game.
The car models also look great, during the replay at some parts it looks like a cinematic! The scenery is brilliant.
AI:
IMO a big improvement from F2. Although they still like to try and spin you out if you block them, atleast they race properly now and fight to the limits. Also, the rewind feature is really helpful if they do take you out, or you just bin it yourself.
Damage:
Well, it is good. A bit funky at some places, like if you crash into a wall at high speeds you might flip over.
The damage between cars however is great.
Mechanical damage is also good.
Overall, what can I say more. I am going back to playing it.
I love the R8, such a blast
Definately a game to get for any car enthusiast.