Damage model implies less resources that could have been in used for something else. Like better graphics, or better physics or whatever.
Normally I would agree to this, but in this case, I don't. GT5 has become very steril over the years - sure, the physics have gotten better, there are more cars to chose from and the tuning options have become more sophisticated - but that's about it.
I think damage is the logical next step in the evolution of the series, not only from a visual point of view, but also as to the potential new gameplay possibilites - offline and online. Damage of course doesn't cure bad driving, but it does influence better driving in general, especially if repairs cost a lot.
The damage doesn't have to be too fancy either IMO. I thought the step from NFS3 to High-Stakes (on the PSone) was huge - simply for the gameplay that damage introduced. Polyphony could take this further - anything that is a potential write-off accident should yield consequences by having the player buy that car again (or repair it for the cost of a new one). Perhaps you could also go further by disqualifying a player from a tournament if he doesn't race accoardingly. An idea would be to have certain tournaments/events where you only have a fixed budget to use on repairs between racers - or none at all, forcing the player to keep his car intact for the entire tournament.