IMHO - RBR and GP Legends, two of the best racing sims ever are kept (very) alive with community mods........
Automobilista, my current single player go to, has many mods for cars and tracks and it's physics are about as good as LFS (in my opinion
), and the AI are light years better than LFS's.
If and when LFS actually updates the physics and AI ( There is NO multiplayer here now ) then great, till then there is no reason to update to S3 (I've got Rockingham in Automobilista, and many, many more tracks including most NZ & Aus tracks .... )
LFS has it's own development speed and refuses to allow mods, fair enough as that's the dev's choice.
The fact that it's regularly hacked suggests that it's still a good racing sim, but it does need an active community to keep the game alive.
As we can't have mods in LFS then we can only wait for the Dev's to actually release the updates, and till then I'm enjoying the other sim's available out there.
Modded games are really the way to involve the community and keep games fresh, alive, and current. ( In my opinion, just look at Skyrim as an example. )
EDIT:
LFS updates post 2005.*
1: - VR, Yeah Right..... Like most gamers ( and most Racing Game dev's )I really don't care yet.... Yes, awesome idea BUT it's only going to be a winner with 4th or 5th gen gear in a game that actually has a user base online racing.
2: - Better track detail, I enjoy (RS)RBR, GP Legends and Automobilista as games, not for their awesome graphics.....
Track detail is nice, but it's only icing on the cake.
*LFS was used by Turtle Entertainment and Volkswagen to showcase the new Scirocco in Leipzig Games Convention in 2008. A competition using LFS was held and the prize was a real Scirocco car. The Scirocco release for Live for Speed had been scheduled for December 19, 2008, however it has been delayed indefinitely due to unexpected fatal flaws in the latest patch and with the Scirocco itself, forcing the LFS team to remake the suspension system and tire physics.