First off
I own each of the major systems; and 1080p screens, and the said steering wheels.
Forza on xbox was the most realistic racing game on the system, But lacked replay and "fun" of Project Gotham 2.
Forza 2 promised much; and in my opinion, failed to deliver on 90% of the said improvements. Many accurately called the game "Forza 1.5" mostly improving only on the fact you could play it in higher resolution, and a few new cars. Gameplay is most definitely not realistic. This could be overlooked to some degree if the in-car camera views weren't so low to the track surface. All the tracks are too wide, and feel flat and smooth.
Additionally, my biggest complaint about Forza 2 is more of a Microsoft issue itself; there is no native Force Feedback support for steering wheels; the system that exists simulates the FFB based on the input into the dual shock deal inside the controller. It is not intuative, nore correct.
PGR 4 for 360 is better, even if more arcade-like. Perhaps because it doesn't aim at a simulation, I give it the nod here.
GT5 Prologue
No damage, and AI is anything but good. It has never been the forte of the GT series. I don't put it in for the AI, but for the most realistic console driving experience out there IF you have the Logitec G25 wheel (although, most logitec Force Feedback wheels are pretty good).
There areny many race cars, but the tracks available are the best out there; and the driving physics (with all aids turned off, and switched to professional) cannot be beat on a console.
Cars that are supposed to oversteer on-throttle do, cars that understeer on entry do, trail braking kicks the car into oversteer... different cars behave differently.
For the best and most realistic simulated driving...
You have to go to your PC; and to a company called Simbin. Their latest game is called GTR Evolution; which is the newest in the GTR series. Race street cars, race cars, download extra cars and tracks made by fans at sites like
www.nogripracing.com; participate in simulated race championships with other users around the world, create fully custom setups based on testing pre-race.
Bar none, the best. Graphically, the only better looking game is GT5. It also supports every steering wheel that can be used on the PS3; including the GT5. Setups for PC simulations can run from budget racers to $30,000 setups with 6 axis hydrolics and a 4 point harness.
A word of warning, GTR is so realistic, it is made in conjunction with FIA GT race teams full input, and telemetry to get the most realism. The game is quite dificult; since a simulation cannot fully depict the "Seat of your pants" feeling; a force feedback brake system isn't cheap, and ABS braking will not yeild fast laptimes.
The best of the systems if you want to occasionally kill some time by yourself, or with friends, GT5 p and PS3 is the best option.