That does look quite impressive, for a second there i was imagining S3
Graphically the xbox360 produces some very nice rendering and the game looked great, shaddow was a little too dark when he was talking about the dirt on the car as you couldn't really see anything but the youtube video quality didnt help and he did say they were still fine tuning the lighting.
I was however unimpressed by the damage model, really saw nothing new there. Reminded me of Race Driver 3, same little looking damage info on screen with tyres, bumbers engines, gearboxes changing colours according to their damage. Damage it self to the car was very similar too with big chunks falling off and glass shattering and a few dents but it wasn't really that impressive, very Toca Race Driver style. I do think they didn't really show that off very well though.
Apart from that the game looks solid and quite good.
I would love to see some wet weather effects if they are in the game, they will no doubt look awesome!
mad