http://gt3r.50g.com/ seems to have pretty reasonable guide to how everything works. Their bit on diffs is as follows:
LSD -- INITIAL TORQUE
Adjust the initial torque provided by the LSD.
Depending on your car's drivetrain, you'll have one or two options here. FF cars can change the front setting, FR cars can change the rear, 4WD cars can change both. Raising the initial torque increases your stability in turns, but at a cost in cornering ability -- i.e., it's harder to turn. Generally, raising the initial torque is not recommended, except for Drift Kings with a knack for using the accelerator to push themselves around turns.
LSD -- ACCELERATION
Adjust the effect of the LSD while accelerating.
A higher LSD acceleration setting gives you more grip when accelerating, for faster acceleration out of a corner, but a corresponding decrease in grip when decelerating, which can cause a loss of stability while braking. This can be moderated by adjusting the LSD deceleration setting as well.
LSD -- DECELERATION
Adjust the effect of the LSD while braking.
Take the LSD acceleration description and turn it around. A higher LSD deceleration setting gives you more grip when braking, which makes for more comfortable turning when you slow down quickly, but less when accelerating, which you can compensate for by adjusting the LSD acceleration setting.
