Yeah the AI traffic flipped and bounced pretty realistically in TDU, but not a whole lot of deformation from what I remember. Bumpers and truck cargo coming off was cool, and lots of sparks.
Burnout easily has the best deforming and crashes, though much of the physics are canned. And the riders on the bikes disappear if you crash! Sucky. I want flailing ragdoll, lol.
Grid's and Dirt 2's damage is really good, but the rollovers are weird.
Probably best all around is Flatout. The demo for the latest one on the Xbox was awesome... just the sheer amount of stuff flying around is sweet. And no canned physics, but still natural looking flipping and rollovers.