Before S1 was released, all we had was a demo. In fact, in the early days I think we had just one car. There were no skidmarks, the windows were not transparent and many features which we enjoy today were not yet implemented. By the time S1 was released I would have already played over a thousand hours. Even back then the barely-evolved demo was good for racing, goofing around with friends, drifting, whatever.
I couldn't afford to buy S1 when it came out. A friend bought it for me. When the S2 license was released I got it right away. When the S3 license was released I got it right away. So you can call me a fanboi or you can call me passionate about this sim, and I'm ok with either.
Back when I discovered LFS there were several car games in development or on the market. The reason why LFS captured my heart was because the developers had released a free version for us to try. It was really easy to get people on board and we built a strong community way before S1 was even available. Demos for other car games were limited either in features or by a time limit, or some other restriction which prevented the player from being able to truly decide if their money would be well-spent on a particular game. LFS did it differently, and as features were implemented the demo got updated too. This way of doing things has been very successful. Just like in the very beginning, any newcomer can try this fully-featured game and actually experience an online community as well.
There may always be those who can't pay, those who won't pay, and those who can pay. They are all fans of Live For Speed, and they perhaps wouldn't be if the demo were not as it is. It's a bloody good demo and it leaves you wanting more, but if you can't have more you don't lose respect for what the game has to offer. You know what it has to offer and you can enjoy it fully.
If you feel that the 'demo community' should be buying licences, then maybe try to encourage them to do so by promoting the advantages of upgrading. Those who take advantage of the free product (for whatever reason) are not doing anything wrong. The demo is there to present the gameplay and physics as they actually are, it's free, it's fun and it has enough content to try out a FWD car, a RWD car, and an open-wheeler. A free mini-game which is a great advertisement for Live For Speed.