Sage
Yes, the false AI speedometer readings is a known... "feature" that PD put in, to keep the AI competitive with the person driving. I believe Der Alta or Famine even did some tests on the issue.
Yes, I have documented it quite extensively, as well as tested the theory in a few OLR sessions.
From what I and others have determined, is that the AI (especially in Amateur and Rally) take advantage of a "catch-up" feature in GT3.
A particular challenge that I noted it in, was a test course run. After noting my time, and the distance around the Oval, I checked the AI time, and did out the math to determine their average speed. It was considerably higher than what was showing up on their speedo in the replay.
An OLR session that comes to mind is the Amateur MR races at Tokyo R246. We took a heavily modified TOyota MR-2 G-limited and raced. The person with the least amount of cash spent was the winner. What was amazing, was that some of the fastest guys on the track (some 30 seconds faster than others) were loosing, while the slower guys were winning the race. The laps times of the AI were adjusting dependent upon your time. Using this same race, I test and F1 and checked the AI times. Yep, much faster.
So the follow-up to that was, taking the replay, sharkporting out the AI car and checking it via MK's utility. Exporting the INI file, and reloading it into my garage. The returning to R246 to test it. I couldn't even come close to the AI times.
What this all boils down to is the INI file and the power multiplier. The Game is programmed to alter this multiplier to keep the AI car within a close range. With a maximum amount chosen. Hence why you'll see faster times when you're using an F1 verses a stock R390 against the AI. But you won't see earth shattering records with the AI times.
As for the sparks, I've no clue why one car would make them and not the other.
AO