I'm glad to finally get a hands-on with this game. The graphics are pretty much what the people who have been following this game were expecting. Not stunning. You don't really have to go out of your way to find graphical flaws. Fortunately, one of the more noticeable blemishes is the behind-the-car view during gameplay (it's not that bad during replays), which I don't use and recommend you don't either. Not only does playing with the Hood or Bumper cam make it much easier for my real driving reflexes to take over, it also improves the view considerably. The sense of speed improves as well.
2nd point I'd like to cover is that this game is challenging for me as a non-hardcore racer. I turned off most of the assists (left on ABS since the real cars actually have it so it doesn't feel cheap to me to leave it on). I started with a C class car and was able to win a race with it and have pretty good control. Then I tried A class....ouch. Couldn't keep the cars on the track. I was a mess. I'm sure I will improve, but for those expecting to just pick this up and be able to handle the most powerful cars , you may have trouble. The actual game will fortunately allow for a much smoother progression of difficulty than this demo does so you can acquire and engineer more and more powerful and challenging cars as your own skills improve.
FF with the MS wheel is very well done and is a night and day difference with the bolted-on FF of PGR 3. Unfortunately, I can't blame my sloppy driving on the controls.

Though to be fair to myself I played Forza 1 exclusively with a gamepad since the XBOX never had a FF wheel. I was so spoiled by my CMR2 experience that I refused to race another game with a wheel that didn't support it. It's been a looooooong wait.
Oh yeah, almost forgot the AI. Much improved from FM1. Watching replays makes this very apparent. No where is this more telling when you can see the cars actually go out of their way NOT to hit you. Surprising how many racers have yet to figure out how to do this.
And the mountain of available telemetry data when you are watching your replay gives an intriguing glimpse of the complexity beneath the surface of this sim. Good stuff!