There are two ways to think about simulation: car simulation and race simulation.
The car simulation does not need a pair in real life cause you just need to model you own car with those things you think is enough to give you a feel of driving. Of course that is not easy to do, but it is easy to understand. So LFS is a car simulator, but yet with too many things to be done to become so realistic as GTR, where you can find many other things being simulated, things that are not still in LFS, but will... someday... I hope...
In the other hand, when you think about race simulations, you need to keep the word "simulation" in mind, cause one thing it to have a race using the computer, and that can be ni any format, since arcades like toca series until netkar pro ultra-realistic scenario, and other thing is to have a real-life race simulated.
A good example of what is to simulate a race is the GP F1 series from Geoff Crammond. That is a real race simulator.
LFS is not a race simulator cause it does not simulate any pair in real life. It is a racing game with car being simulated. The race is real, it is there, it is not simulated, you are racing against other people in a virtual tray, so you are not simulating anything, just racing. It is the opposite to seat at Schumaker's cockpit and think that you are doing what he did in Barcelona someday.
I don't expect that too much people understand or agree with my point of view, but I think that LFS is the BEST racing game for multiplayer purposes, and a good tyre/suspension simulator, but not the best racing simulator.
The word "simulator" when applied to a race is more about GPL or GTR than rFactor mods (there are 2 or 3 that worth the pain) or LFS. When applied to a car, I guess GTR series is the best at this moment, not because it has the best physics or feeling (and it has not), but because it simulates much better more things (and in a good format) than LFS.
But if the contest was about gameplay, multiplayer content, tyre physics and force feedback, surely would be fair to say that LFS wins the trophy.