I haven't touched it yet, my only understanding of LSD is to stop the back end spinning out when exiting turns.
It's sort of like a clutch for the differential, it distributes torque between the 2 wheels. With an open diff, only 1 wheel gets power. You would not be able to drive a car down the road (successfully) with a completely closed diff (i.e. a spool), as the inside wheel would drag when going around corners. LSD takes some power away from that wheel while turning, but creates a spool like effect when going straight under power or braking.
There are 3 aspects to it -
Initial Torque determines the sensitivity of it - When does it kick in?
Accel sets the degree of the LSD effect under power
Braking sets the degree of the effect while off the power
All of it can give you more grip, but it can also make you understeer. Since we already have downforce, and a race car with race tires, on a banked track, there's a lot working in our favor in terms of grip.
The settings on GT5 are sort of counter intuitive. A "standard" LSD setting is something like 10/20/10. If you lower the middle number (accel) it actually heightens the effect of the LSD, giving you more grip but more understeer.
I tried 5/5/5, but the car pushed too much. I tried all Max settings, and the car felt fine, but my ghost would pull away, suggesting that I was losing a tiny amount of grip that was not even perceptible. Same with the open diff, my LSD aided diff would pull away.
Another thought is that I have not tried active steering, which is sort of like a dynamic LSD. It might be that AS would also help maintain grip when coming out of the corners.