I tried the nK demo last night and, frankly, the physics and force feedback are excellent. Both are better than LFS, in my opinion. And that's saying something, because I don't think there's much that can even compare to LFS in these areas. We'll see how LFS compares after the physics patch. At that point I think both games will be on fairly level footing.
The sounds in nK are horrible by default. *IF* you can fiddle with the settings enough, and IF you have the right hardware, they can sound amazing though. There's a thread on the nK RSC forum about sound requests and one of the posted sounds is just fantastic. Kunos has said he'll put the other sound package back in for the first patch in a week or so. Personally, i think he should stick with what he's got and just make it work a little better on a wider variety of systems. Debugging and developing two different sound systems is just asking for problems.
The "Full Mode" shows real promise, especially for league play. It's going to totally change the way sims are handled when damage and tire changes take place in real time, or when your tires are flatspotted and you don't have any spares left.
The suspension damage model seems pretty good, though engine damage doesn't seem to be in. I wasn't able to blow my engine, even going from fourth to first.
Aside from the physics and force feedback - the rest of the game needs a lot of work. The UI is horrible and there are tons and tons of bugs - many of them showstoppers that CTD or freeze the game completely. Not having a tach, speedo, or gear indicator in the demo is just ludicrous. Also, the clickable cockpits are high on 'cool factor' but low on usability. The way that button/key mapping is handled needs to be rethought and every function needs to be assignable.
Overall, this sim shows real promise. If Kunos can manage to fix the bugs, make the sound system work as well on a Sound Blaster as it does on an Audigy, and fix the key/button assignments, he'll have a hit on his hands. As it stands now, I'll be waiting for the first patch at minimum. More likely, I'll be waiting for the first user-made Tin-top since three open wheelers just doesn't do it for me.