That rally game looks fairly impressive, but if you compare to what you see there, even to the rally part of GT3, it doesn't look 1/2 as good. Why? Look at the environments... GT3 brings the tracks to life, the rally game on X-Box is just... road/dirt with a car and 2 guys.
That is one of the reasons that I bought GT3; any race track you chose (except the test track of course), is filled with details, from the advertisements on the sides, to the carousel at night, to the people on the side, everything is brought together to make a really cool looking, living racing environment. When you add great looking cars to it, the game just draws you in to the point where you have it hooked up to you through IV's when you're sleeping at night.
GT3 is simply the best racing game will probably remain so for a VERY long time (or until GT4 comes out).
BTW, PS2 will in my opinion beat the X-Box in the console wars because of all the 3rd party developers making games such as Metal Gear Solid 2, Final Fantasy X, Grand Theft Auto 3, Devil May Cry, etc. All great games, MGS2 really shows what the PS2 is capable of, FFX is sure to turn heads, and GTA3 is simply one of the funnest game ever made. Microsoft is going to have to PURCHASE game developers (such as Bungie making HALO) and force them to make all the QUALITY games for it's X-Box. Sure some great games will break through on X-Box, maybe even some PS2 ports, but X-Box won't have the vast amount of quality games that the PS2 will... And that's why the PS2 will win, plus everyone hates Microsoft, for whatever reason it may be...