Never had this problem but is try pausing the race un plugging the wheel for the console and power source and then unpausing.
Thanks guys, did all that. I sent logitech an email about this. They answered back with instructions to reset, did the reset but still the same, paddles on the wheel does not work anymore. Tried it with GT5, Dirt 3 and Race07 on pc but still have that problem. Hope logitech will replace it, still within 1 year.