I also find that if we race more carefully and without throwing in elbows out hard apex dives, the standard AI seems to respond well.
Yep totally agree, in a vaguely balanced car, if you race against the AI trying to avoid all contact and trying to make a legitimately clean pass at a realistic place etc., it's actually pretty raceable a lot of the time. Sure they have their turns where they brake at a weird spot and so on, but it's possible to go a few corners side by side etc. and have a reasonable race overall if you set things up right in Custom Race, it's just a shame it takes so much manual balancing by the user, not helped by Custom Race still being broken in even the most basic ways like not being able to turn Boost off, AI tyre choices etc. etc. etc.
I'd also say I don't agree with the 'hard to catch oversteer' theme either, it seems very well communicated both in terms of visual cues, audio cues, and FFB. There are certainly a few uncatchable instances that revolve around MR cars but that's pretty realistic, if you get an MR past a certain point of rotation you're fighting against a lot of momentum that makes it very hard to catch without scrubbing off a lot of speed.
Other than the slightly annoying understeer 'wobble' / vibration feedback, my only real gripe is the way wheelspin is handled, especially obvious in powerful rear wheel drive cars the rear wheels act like enormous flywheels which I can imagine contributes to this 'uncatchable' oversteer feeling.
If you get enough wheelspeed that's disproportionate to your actual speed, the rear wheels become unstoppable, even if you're completely off the throttle, which is ridiculous.
Easiest example is put slicks on a wet track, spin the wheels up to the top of 5th whilst barely moving, and you can be off the throttle and entirely on the brakes and still the wheels are spinning... It's as if they weigh hundreds of kilos and have almost unlimited rotational momentum. I can see how this could cause unstoppable oversteer, because with a lot of wheelspeed you then suddenly don't have any throttle control over the rear wheels, you lift off but they just keep on spinning which is way, way off reality.
It'll be interesting if this is addressed in the physics update, potentially the wide body / wide offset wheel trapping issue being so common as well, perhaps that's suspension related.