After seeing this video of a real life race in this thread, I think that GT's AI is fairly good (notable minor exceptions excluded).
https://www.gtplanet.net/forum/showthread.php?t=119698
However, I do know that it's more fun to race against f1 championship edition's AI, so perhaps polyphony need 2 modes for AI, to keep people happy.
1. Simulation Mode - real life driver simulation.
2. Arcade Mode - more fun, like f1 championship edition, or I assume forza 3 (having never played it, just judging by the video). Where unrealistic overtaking and more door handle to door handle racing with multiple cars around you.
Otherwise I find GT prologue a bit too boring to race against the AI at times.