that's right... arcade mode is same physics as other offline A-spec stuff. turning up the AI aggressiveness to 10 makes the racing much closer.
over at the PSN Deathstar, we are debating the choice between:
adaptive AI that learn how good you are and respond, either within a single race or over several races (<-my choice, because it would be harder to cheat that system)
AI difficulty slider (should probably go to 11 just to be safe)
it's a lively debate but in the end no one at PD will probably read any of it and will just do their thing as they see fit. We'll probably like it better than GT5 I think, but maybe not as much as we had hoped and dreamed. Such is life.