No, first, TCS is locked to 7 for the untuned and ONLY for pad users.
Its greyed out and "7" in the options when you use the wheel, but thats a bug, its off when driving with a wheel. Otherwise, this wouldnt be possible: http://www.youtube.com/watch?v=FeJQ30SHl1I
This type of TCS though doesn't necessarily mean you can't spin the wheels. It's a slider, but in these extreme circumstances you can still spin it out. The reason that the car straightens out here though is because the TCS is still there. This generic, 10 scale TCS however is a driving assist that has little to do with how TCS works for specific cars. At least, that's my theory.