Cool! So now we can edit songs in GT5!

Who needs Cubase!
GT5: The real DJ simulator....
As cool as editing music is, TBH I don't think Kaz is going to include it as a major feature of GT5.
On the other hand, if it ships with music editing software and none of the other features, he may well go down in history as the greatest troll to have ever lived.
For the track editor, it could be done on the PS3, provided they do it "in-game" with decent camera controls and keep it as a brush-style generator.
As in, they give you a big flat square, then you generate a track by moving around the map with your pointer and pressing x to lock a point in, and it generates a smooth curve based on your points.
The next step would be the gradient; it goes into isometric view and you move the cursor with the d pad or stick and X makes the terrain rise and O makes it fall. Then once that's done, material time. Scroll through several kinds of tarmac (grippy, not grippy, etc) for the track, then other stuff (sand, grass, gravel, astro-turf, etc). Next, trees, and buildings (individually or brush in 5-6 trees per click, perhaps being able to select types and stuff).
Then it gives you a car (SLS or 458 or something decent) to drive around on. If you don't like it, you can go back to whatever step you want and change it.
If you're happy, it calculates nodes for the AI and then runs that through a few times to make sure they don't suck (too much).Once it's happy, it compiles to binary/.ps3 file format, and saves to your HD/something with a USB.
The track would then become available in the 'Created Tracks' hall in GT mode, and it'd be available for arcade mode as well. Oh, and the PS3 would compress it to something reasonable so you could join a race online with a new track (like playing on a new map in tf2 or something on Steam).
That would be EPIC.