As this is our first proper look at the deformation damage model, I have to say I am disappointed.
The reason being, it takes way too much to damage the cars. The deformation itself is excellent, don't get me wrong. But so far we have seen cars need huge collisions to get a slight dent, and we have seen deforming carbon fibre

. This is not perfection, nowhere near.
Now we have seen the damage model though, comparisons have to be made.
I feel the damage model is good and accurate, but unrealistic in the scale of the damage for a particular impact. That is partly understandeable, for the following reasons:
1) The manufacturers limit the extent to which cars can be damaged
2) Development reasons and hardware limitations; Whether it be modelling the actual damage, or processing the calculations necessary to show the damage, only so many calculations can be done on impact without affecting framerate too much. I feel games like Shift use the 'screen shake/blur' to hide this problem.
Looking at the actual deformation of parts, you can see it is done to a higher standard than Forza 3 (After a number of crashes when you actually start seeing the deformation... lol). The damage actually affects the area of the impact and the crumple zones are replicated partly in the real time deformation engine. At least on the Motul GTR... on the road cars the damage seems a bit mediocre.
You can't see from the videos what the mechanical damage is like, i'm hoping that will be good, affecting the suspension and such. If the road cars have the same level of mechanical damage as the race cars, then it should make up for the difference in visual damage.