It definatly isn't realistic. It probably isn't even possible...
Once, a long time ago, some programmers made up this contest. The goal of this contest was to script an AI 'driver' to race against other AI 'drivers' on a super simple racing simulation. People could write MOUNTAINS of scripts, but there was always someone faster. Even the 'fastest' at the time often lost their title as someone developed a faster AI. The cars had simple suspensions, G-Forces and traction circles, could damage each other by hitting (so they avoided it... Usually). You could run off the track, the AI had to follow the line...
There were some AI scripts that, literally, slowed the processers to a halt. Why? Because they tried to calcualte the 100% perfect everything. They never succeeded.
AI will never be 100% unbeatable if you stick them with the same rules players have. Its just not really possible without spending far far too long coding the scripts, and then a single AI car would probably (at that point) slow you down.
AI should be challanging. They should learn, race clean, and adjust in difficulty to match your pace. Guess what? For the most part, they do that. Its not perfect, no. Maybe you can always beat the AI, so what? Give them handicaps to keep the races closer. Or play online.
My point is, again, yes, it needs some work. Most of the things in LFS need at least 'some' work, and several things need a LOT of work. But the trick is, to wait patiently. It will come, and when it does, it'll make a lot of people happy. Will you be one of them, or will you have already given up an Online Racing Simulator because the offline AI was too easy?