Pretty much everything artificial intelligence is based on search, the computer tries a lot of things and uses some heuristic function to estimate whether the direction its going in will lead to the goal state, i.e the fastest lap.
I think the reason the AI are limited at the moment is to keep cpu requirements reasonable. They could quite probably become ludicrously fast within their own representation of the world, by feeding them more data, and building in penalties added to the estimation for contact with other cars etc.
It would even be technically possible to produce some very human like behavior, with a few very simple additional rules to manipulate the search direction, especially when interaction with other cars is involved. This all costs time and cpu power to implement though, so I wouldn't hold your breath. Just look at the way ants work together, with just a set of very few simple rules "find food", "hord", "don't stray further than x from the next ant", "run like crap if you see an anteater", throw them all in together, you get complex behavior out the other end.
Does anyone know if the developers have considered using a neural net to run the AIs?
I would be interested to know whether the computer knows how well it's doing that by guaging that lap time, or the time to complete a section.
I'm a Computer Science & Artificial Intelligence student at Sussex university by the way, in case anyone wondered why I know anything about it.