S3 has nothing to do with the game engine... S3 just shows what content you are allowed to use. For example the VWS will be available for S1, the updated tire physics will be for demo, S1 and S2.
It won´t be called S3 because it´s finished. It will be called S3 because a new set of content will be available. After S3 is out, the development will not just stop. It´s not even said S3 will be the final stage.
Nobody ever gave a hint that a new game engine will be used.
woooooooooooot you don´t just open the dds folder typing in: change brightness x% + / -