Its been a while...
Anyhow, from my own interpretations of the AWESOME GT5 video, there may not be damage in 'all game modes'.
For Instance, in the NASCAR section where the #24 car spins off (just as the #14 car passes by below). If you do a frame-by-frame of the action (from around 1:35 onwards), you will see the #14 car bump off the right-hand side rear quadrant of the car, and continue on, without incurring any damage or noticeable loss of speed.
Look very closely at the shadow of the #14 car as it approaches the #24 car. The shadow is clearly over the yellow line at the bottom of the corner. As the car continues around the corner hugging the yellow line you will see that the shadow rises ever so slightly, so that some of the yellow line is now not entirely covered by the cars shadow. i would expect this for a car following a line through the corner.
If you continue to do the frame-by-frame right before the impact you will notice that it takes the #14 cars shadow approximately 4 or 5 frames to rise above the yellow line. Then as the impact takes place, the cars shadow clearly 'leaps' back to cover all of the yellow line in 1 or 2 frames, this is contrary to the direction and momentum of the car.
I'm not sure if the track is Daytona, but having raced extensively on Daytona Speedway, I can say that I have witnessed this phenomenon many times in my eagerness to overtake some guy on the inside. At the speed that the #14 car was travelling, I would think it almost impossible for any driver to manoeuvre with enough precision to dodge a car like that, especially at the bottom of a banked turn. I'm almost certain that there is also a very small puff of smoke visible from the left-hand tires as the #14 car bumps into the #24. If there is, then this would confirm in my mind that there was indeed contact.
Although not concrete proof that there is no crash damage physics in all game modes, the sequence does cast some doubts in my mind. It is also telling that you do not see the aftermath of the #24 cars crash into the top wall.
Other than this small observation, I am very seriously impressed with what I see! My only other gripe is that there was no mention of a new and improved Photomode section. 👍