Regarding Head Tracking,
Go to Options->Hardware, then scroll all the way to the right for PS-Eye,
Then set the range/angle (first 2 choices) to 7 or 8 (to exaggerate the tracking).. Ensure you can see yourself in the live PSEye view shown on that options screen, If it puts a cross on your face then it's picking you up.
It doesn't activate in Licence tests/A-Spec races, but it works in Arcade Races, the Red LED will light up when the PS-Eye is engaged.
The reason it looks like it isn't working is partly because the range/angle settings are so low, you have to turn your head nearly 45 degrees before you get a slight movement on screen!..
I've tried it, and turned it off, the motion as it pans makes me think the car is sliding and I keep reacting to it, you may do better with it..
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Just played with the settings some more and got it working as well, but only if I'm sitting less than a metre from the Eye - not sure if the range improves with better lighting conditions.
Also only works in cockpit view which is fair enough.