Well guys, thanks for all your help and...
PROBLEM SOLVED!!!
The DirectX version I had was from my GTR2 install. I had assumed this was the latest version.
I don't know. Anyway, I downloaded and (re?) installed DirectX and it's running beautifully.
I can now play with 10 AI cars, with everything ramped up onto full, including the video hardware (x4 AA, x16 AS, image quality on "full quality") and it runs flawlessly. The wost FPS I get now is about 30-35 (with 10AI at the spots where it was previously about 9FPS with 4AI) and it now I regularly see it going about 200FPS!!!
Woohoo! I'm so pleased. And this game is just SO DAMN GOOD.
Easily the best racing sim I have played so far ... and it's not even finished!! I'm excited!!