The physics in Gt4 were incredible for a consol game. They just decided to maximise the performance in that area rather than make the game scale well on higher end lcd set-ups. (1080i and 1080p)
It was a smart move, imho. Most people play on older lcd's or even brand new ones that are still quite nice that only do 720. That game did an awefull lot. I'm not sure today's consols could handle Bioshock type graphics along with Gt4's open world and physics. Pc could, but this game was intended for consols.