I've just started Monaco for a WRC2 team on the Career mode. OMG this is such a massive leap forward over the WRC3 game! The handling is really really slippery like you're actually racing on ice! (all the surfaces now handle differently, whereas WRC3 kind of all handled the same)
And yeah, there is so much more depth to the courses, way more detail, far more trees (and although they're still a bit cardboard cut out, they still look far far better than the previous game).
I hope snowprince can show me the PSP games that look remotely close to this, because I think they'll need buying on PSN. However I get the feeling it was all bull as I've not found anything on PSP remotely close. Yes it has aliasing problems, and some of the textures are on the low resolution side, but overall it's a very technically impressive game.
Just for a bit of perspective, here was Evolution Studios' (Motorstorm) 4th effort at a WRC game for the PS2...
So yeah,considering this is a handheld, it's definitely above PS2.