Unless cars can be wrecked like you can see on
www.wreckedexotics.com I wouldn't consider damage in GT5 (or in any other existing game) realistic yet.
More than driving realism I was referring to the actual tyre type cars come with when you acquire them in GT.
For example, I would expect a Suzuki Wagon R or any other minivan/econobox to come with N1 tyres.
Sports cars like Nissan Silvia, Mazda RX7, Honda NSX, etc, would come with N3 tyres.
Saloons/wagons or other medium-class cars (Volvos, standard BMWs, etc) would have N2 tyres.
Cars almost ready for racing but still road legal like some Ferraris, Porsche GT3 (if they're in the game) or some special supercar, etc, would have S tyres (Semi-slick tyres)... maybe S1 or S2
Racing cars (not road legal) would come with R tyres.
Up to GT4 (again, I don't know if this has been changed in GT5Prologue. It had in GTTT, but with one car it's hard to say if it will be the standard practice in the final game), standard tyres were S ones for road cars, R ones for race cars. So as default, most cars, especially cheap ones, had excessive grip in most situations. For a more realistic driving experience I remember fitting N tyres to most of my cars, but this "worked" only on time trials, because the CPU still used standard S tyres in most races involving road cars.