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HappySqurriel said:

From a simulation perspective they probably are approaching the limit of what can be simulated that people would notice without having an order of magnitude more processing power ... Certainly, with 100 times the processing power and 100 times the memory they could create a rough fluid dynamics simulation in order to have the cars be effected by how the wind interacts with the aerodynamics of their body, but how much more can you add without adding a dramatic ammount of processing power?

And exactly what bang for the buck will you get doing that?  Sure, it may be better, but what percentage of people will really notice it?  You hit a law of diminishing returns in regards to this.

As far as improvements go, you can improve by actually doing a different game with a different focus.  You can add more content and do more types of races (GT is doing this), but as far as internal quality?