I like the PP, you have to take into consideration the cars you are aiming for. The PP system doesn't take age of the car into account, so even though an F40 is built to the same PP as a F430, the 430 will kill it round the track due to more than a decade worth of automotive tech advancements.
The PP system also doesn't consider engine placement as well. Similar power/weight cars on default PP, one can be FF and the other MR, there's no contest. MR cars are usually better at PP levels, while FF cars usually suffer, while 4WD and FR cars are about middle, (I am generalizing here). If the host restricts drive train as well, you will often get closer racing.
It's just a matter of knowing what the regulations of the lobby are and what the other drivers are competing in. You can't just take any car set to a PP level and expect to be top of the time. That is the biggest misconception about PP. I believe it's there to level a playing field of a certain category of car. Take the SuperGT GT500 class for example (premium cars only). If the lobby is set to power/weight, then your either in a GT-R or your back of the pack. If you set it to 600pp, then it opens the field up considerably and makes the racing that much more even across the different car types.
I also don't believe that detuning a car will outperform one that has been tuned up. I always tune up my cars as I find them faster, in particular now that Slipstream can be set to Weak, if you tune up a car, then you will most likely be producing more horsepower than a car that has been detuned, and can get away on the straights.
There are always exceptions to the rule, cars like the LFA stock have PP well below what they can perform at, and therefore stick out when running at certain PP levels, which can, and should, be fixed by PD in a patch. I remember they re-balanced some of the PP levels in GT5 Prologue, yet I don't think they have with GT5.