Another few impressions after playing it for some time...
Graphics
A little "overpolished" at places, but overall very nice! The cars don't look as nice as in GT5P, but they are still not bad looking at all (easily better than Forza). Every model is done with great detail. Especially the interiors are really beautiful. The environments look better than in GT5P IMO. Forza Motorsport 2 tracks look bland compared to the ones in FC.
FPS is an issue in Ferrari Challenge. It runs at 30 FPS, and there are well noticeable FPS drops from time to time. It's not running bad, but sometimes it's annoying (let's say in the middle of a corner with cars in the front and back).
Replays are not my cup of tea. They are filled with effects and filters... shaking cameras, etc. The usual "make it look cool" stuff, but completely exaggerated. Beside that, there is no option to change cameras, fast forward, save the replay... in fact, there iis no option at all to do anything in replays. Nevertheless, you might catch a few nice scenes/views sometimes.
Physics
This is a hard one...
It's not easy to find the right description for Ferrari Challenge's physics. It's not exactly a simulation. Because there are too few options when it comes to car setups to begin with. You can adjust a few settings like suspension and ride height... but the only change you can do to your suspension is to decide for "soft" or "hard", just as an example.
The handling and actual physics are not too bad. Some things feel very good. If played with a G25, you get a great force feedback... understeer and oversteer is simulated very nice... you can feel when you start to lose grip... etc. It's pure joy to drive those ferraris at their grip limit. Maybe it's a little overdone, not sure... but it's so much fun to "drift" through the corners in this game! With drifting, i mean the "real" way of drifting, not sliding. There's a moment when you go a little sideways, but your tires still have grip. It's the very moment before you hit the limit of traction/grip, and it's what i call the real drift. But not to start a discussion about that now... i guess you got the idea. And well, this kind of drifting can be done very nicely in Ferrari Challenge, and is a lot of fun!
If you try and get sideways with the cars, then it's still on a simulation level somehow, but it feels too easy i think. This might be becasue of the way the G25 acts in FC. I didn't make any kind of tests to really find out, but when you look at the wheels of the car, they stop turning at about 120 degree steering wheel rotation. However, when driving, turning it further, will still feel like you're actually steering further. On the other hand, it doesnt need much rotation to countersteer for a big slide.
I dunno how to describe it best, but this is why the game feels like arcade to me. You can control the slide like in a simulation, but if you are used to 720-900 degree of wheel rotation, then Ferrari Challenge feels arcade-ish, becasue it's only using 240 degrees i fear.
It sometimes feels similar to GT5P (becasue the in car view looks almost as good in FC), but without all the GT flaws. You feel the weight of the car, it doesn't feel weird when drifting, it doesn't "float" around in grass or dirt/sand, etc.
This might only be my personal taste/impression tho. Overall the physics in Ferrari Challenge are very good i'd say. I might go that far, and say they are the best on a console. Some people will still like the physics of forza 2 better. Point is, they might be better in fact, but it's hard to tell. Both games have a "different" feel of physics. While some things are done very nicely in forza, some other things are done very well in FC. It's a matter of taste. But for me, together with an incar view and the G25, FC is the clear winner.
It feels a lot like playing on a good old arcade machine, but at home, with modern graphics. I can't tell if it's really just the steering wheel rotation that does it for me. But it has exactly this kind of arcade machine/game feeling. Together with simulation-like physics...
Sound
As far as engine sounds go, Ferrari Challenge is pretty damn good. The rest of the sound effects are not bad, but not mind blowing either. But just for the engine sounds, you gotta love this game. They are still samples, sure, but they sound bloody nice!
If you ever wanted to feel like driving a ferrari, then this game probably isn't a bad way to have it simulated. And the engine sounds are a big part of that.
Tire sounds are better than in GT5P, but not as good as in Forza 2.
The noise of the car (suspension, chassis, drivetrain, etc) is very good. Reminded me of Rfactor the most. There's a lot of noise in race cars, they sound like you'd expect them to, more or less. A lot of gear whine(?), shifting noise, braking noise, etc.
In short words: Good sound effects, outstanding engine sounds.
Fun/Gameplay
This is an easy one...
Ferrari Challenge does one thing very well. It creates a good and intense racing experience. It's a long time since i've had so much fun with a racing game. It's a game where it is a real joy to drive fast with a car, to drive a car at its limits. Some of you may remember how much fun F355 Challenge on the dreamcast was... it's exactly like that! Only with better physics and graphics...
The AI may help here aswell. First they are not very smart, but they learn from you. With time, you will see how they improve, and races become harder and harder. You will see how they try to outbreak you (not always succesful (lots of fun!)), how they try to block you, copy your favourite spots for overtaking, etc. You sometimes almost feel like driving against real players.
It really creates the feeling i remember from F355 Challenge, and it's simple and pure fun/joy (a good wheel is a must IMO)!
The only bad point i can think of is the clutch which isn't supported. This would easily double the fun.
In short words: Full fun factor!
Summary
Go get it!