I've had a change of heart.
I now believe damage is VERY important in GT5
As someone who has hundreds of online races under their belt with damage on I can tell you it is very important.
True, at times someone can take you and perhaps themselves out, but in the end damage is for the better.
I've been watching youtube videos of GT5 Prologue online where everybody just drifts up and slams the walls at High Speed Ring with little speed decrease and no damage. The driver who is cautious and takes the correct line is punished.
You might say "What if they ram me off the track and destroy my car?" Well from my vast online racing experience I can tell you its your job to avoid other drivers. If they're riding your tail just pull over and let them by and wait for them to make a mistake which they almost always do and pass them back.
The key to winning online with damage is to make it through the first few corners cleanly, and that means letting other drivers by if necessary, and then start picking them off 1 by 1. A dirty/bad driver won't be able to keep up as he will get damage or spin out frequently
As for endurance races, I've been a part of online endurance races that featured damage and others with no damage. I can tell you the races with damage the drivers tend to use caution, though some are still idiots, but the endurance races without damage bring out the worst in drivers. They tend to show little respect in their driving without the fear of damage.
I have confidence GT5 online will be much better than Prologue partly due to damage