Well, I've had a couple of days with the demo, and feel I have made my mind up about.
Graphics wise, I was initially a little disappointed, mainly by the replays of all things, the slight low poly LOD, the lack of anything but an unlit basic interior when viewed from outside, etc..
Whilst actually playing in chase-cam or when you get close to other cars in a race it's actually a big step up from FM2, not GT5 level of course, but actually I was more impressed as I put more time in that the models/reflections etc are all top notch.
So, initially disappointed that really GT5 fans have a lot of 'useless' ammunition now to fling at Forza, although reality dictates that graphics are only the tip of the iceberg in any game.
Now, what is defo on par, or better then all the other games is on Monserrat, the track, trackside and scenery are stunning. I run in bumpercam, so I have the best 'view' for racing, and quite frankly I am stunned that this lives upto and exceeds the hype that has led up to FM3. But it isn't just the scenery, the other main thing that stands out is the rear view mirror in bumper/hood view which is very highly detailed. You see the smoke from your tyres, you can even see awesome reflections in the bonnets of the AI cars behind you.
It's not fair to compare Monserrat to GT5p's London, the Draw distance is much lower, so you would expect it to be able to look good.
On to the Physics.. I'm only an pretty average driver, but was ranking in the top 50 in the GT3 RSR last night so I'd say that I'm driving that car very close to it's limit. The physics are pretty decent, the ability to feel and balance the car on the throttle, brakes is very involving indeed. Like FM2, the weight transfer and suspension loading is top notch, and you can really feel what the car is doing, it's probably the best console racer at the moment by a margin.
I know that a certain type of person that is concerned about graphics absolutes is going to be very happy in lauding GT5 screen shots over FM3 screenshots, but that's really being unfair to a game that probably is as good as the hype in everything but the car graphics themselves.
I think if FK and other tracks share the same sense of detail and draw distance as Monserrat, you really have to be very sad to start hating on the game that has only had 2 years development, yet is going to offer one of the best gaming and driving experiences on any console.
GT5 (also a game I'm so looking forward to), is not without lots of graphics faults while actually 'racing'.. it's capable of much higher LOD's which can give some awesome screenshots which will always be a degree better then FM3. However, just from the GDC Demo, there are some pretty sub-par elements that actually are very noticeable in actual gameplay, the one area most of us spend all our time. Things like
1. Some moveable track items don't show in the rear view mirror at times
2. Quite low detail in rear view mirror
3. Horrible low res shadows with weird aliasing effects that look poor
4. Very low LOD on wheels which are at odds with the car models
Having seen all the video footage so far, as impressed as I am with the odd car shot/headlamp shot from replays that looks realistic, when in-game, in-motion, because most other cars are a distance away, it actually looks no better then FM3 in the main.
I think people should just stick to the game they like, taking 'absolutes' of graphics to pronounce a game 'superior' is really not being fair at all, and it does tend to make people sound like graphic whores, which quite frankly is one of the explanations to their behaviour that fits quite nicely.