I found rFactor quite atmospheric. Its physics often get slated because they are spreadsheet based rather than calculated, this can lead to unrealistic 3rd party mod cars - however most quality mods the authors really put some effort in, in some mods they even got real drivers in some cases to give guidance on getting the data right.
Of course a lot of the rFactor mods are faked with guesswork physics, but one thing is for sure racing a pack of Le Mans cars around Le Mans is a darn site more atmospheric than racing a bunch of GTR's around Aston North, or Watkins Glen in an F1 car in 1979, or maybe you fancy Porsche Super Cup around Donnington.
As for the physics / tyre model. Well sure LFS' is better, LFS also has better replays, its the only sim with a fully functional insim interface and yes it's my favoured sim, but rFactor is extremely atmospheric and whilst its weeker on some points they are still sufficient.
Just dont go downloading every mod like crazy because some of them really are poor.
One thing about rFactor the force feedback support is particularly week, and indeed for my MS Sidewinder FF Pro wheel required some editing of config files just to get it to a non-bugged state. The canned FF effects really are apalling in rFactor and for me this remains the biggest reason for me not to play rFactor whilst I still have a wheel that it is not natively compatible with.
GTR2 has the same FF problems as rFactor, less mods, but more eye candy overall. It's fun if you like the cars available although personally I am not a fan of big cars on big tracks but the V8 Supercars mod is superb.
For me rFactor and GTR2 are not of release quality because of the bugged force feedback, but if your wheel workis and doesnt take hours of experimentation and technical stuff to get working then they're good products.
One final note, if you can find the setting in the config files to make trackside debris permanent in those games it really does add to the atmosphere. Personally I find nothing destroys emersion quite as badly as track side objects and bits that have fallen off cars magically reappearing 20 seconds after the pack has passed. It doesnt particularly effect fps on a half competent computer (as your lowest fps is race start, a torn off bumper later on in the race isnt going to hit your fps as you zoom past it), and is well worth doing.
Dont ask me where any of the settings are, I dont have any sims installed on my current machine.