There's something fishy with the 120hz option.
Yesterday it worked great, close to 120fps in performance mode in offline races, vrr doing its job (58 fps in menu cafe, why?!).
But today, man I had loads of issues. Stuttering, screen going black, etc. Checked everything (tv, console,etc), restarted everything, nothing worked. My tv showed i was in 120fps mode, and vrr enabled.
Why I think it's the game itself : there was nothing in the 120hz option ingame, all I could see was '--', no activate or deactivate. And whenever the framerate dropped below 120fps, screen would go dark as if VRR was acting crazy.
After many restarts (logical and physical, tv console, games), disable/enable options with my tv, with my ps5, deleting my gt7 save, starting gt7 with 120hz disabled in ps5 settings, I finally was able to see again the 120hz option ingame as it should be (activate/deactivate) and make it work again. Don't know what did the trick tbh... but it is definitely not normal, and I wouldn't be surprised if there is a bug in this new feature with gt7.