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Well I have F1 Championship Edition for PS3 and that has damage online, yet almost every online race is conducted with collisions off (i.e. all players are ghosts). Why? Because when collisions are on and cars can be damaged the race is all but ruined for almost everyone playing in the first corner. It's not just idiots who want to ruin it for everyone else, it's also the fact that a lot of people will never be that good, and they can't help taking out three other players when they mess up a corner.

It's unfortunate, but the only answer to having proper online races is to have collisions off. Makes it kind of lame, but if you want to test your driving skills against others damage does not provide an answer.