My thoughts so far.
Graphics: There's no doubt about it, this is a huge step up from FM2, car models in particular are fantastic. Having said that, T10 just don't seem to be able to nail that photorealistic colour palette that PD does in the GT series, everything still looks a bit over-saturated. Overall though it's a gorgeous game, and the cockpit view (which I will always use) is superb, the driver's position and FOV are just perfect, the only criticism of the cockpit view I would have is it could do with a little more movement, it's a bit static.
I don't think the jaggies are that bad at all, in fact there are a lot less jaggies than the first game. I'd actually say it's one of the crispest looking 360 games yet (I'm playing on a 50" Samsung DLP @ 720p).
Sound: Again, fantastic. Engines sound natural, meaty and correct.
Physics: Here's what it's all about, and I'm glad to say it doesn't disappoint. After the mess that was Shift this feels utterly sublime. Cars feel more solid and weighty than in FM2, and you get great feedback from the car, you can really sense weight shifting and it all feels so 'right'. I'm only using a pad and the controls are great, just the right amount of sensitivity and response, and you can put the car where you want and be lovely and smooth. What impressed me most was the MINI, it felt and behaved EXACTLY right, it's an absolute hoot to play with lift-off oversteer just like in a real FWD car.
All in all this is just what the doctor ordered after the disappointing NFS:Shift, it's everything I was expecting and hoping for