I've actually been pretty impressed with the A.I. in GT5, on certain occasions.
In the 4hr Roadster endurance racer I used an underpowered car and was impressed with the A.I. They would block sometimes, and on the straights if I was coming up behind them they would pull to the side, let me pass, then get back over. It impressed me, especially after hearing all the ad things about the A.I. I was never hit in a corner, or spun out by the A.I. either.
The only complaint I have is they aren't competitive enough.