I thought GRID did this for me but I am glad for anything Bizarre Creations can do as thier pedigree speaks for itself.
What really made the racing exciting for me was simply making the AI as agressive and random as human players can be and having enough cars on the race track to ensure the AI has a target to interact with.
Gran Turismo, PGR4 and Forza, for all thier strenghs, make the computer cars drive perfectly as a professional racer would. This means mistakes from the computer are few and far between, and very few overtaking moves. To be honest, it resembles a conveyor belt of cars rather than a bunch of racers eager for Victory. Playing these games becomes cold and clinical for me, about racing lines and braking zones rather than adrenaline fuelled competition. The cars may as well be ghost times.
It is Realistic I suppose but I guess what people like me want is "movie realism" in thier Racing AI, i.e daring moves and the risks associated with doing so.