I'd change the word quality to consistency. Quality wise, GT looks better than any other racer on last gen. PD not wanting to outsource car models or legacy tracks and insist on porting old modeling data was a problem. Their engine is still graphically impressive most of the time.
I do know what you mean. The engine is great, but it still looks awful half the time because of the terrible models it's forced to display. Unfortunately, the player is exposed to the whole thing as a package, there's no part of the game where you're purely experiencing the engine without the models.
You can build the greatest car in the world, but as long as it's stuck on retread tyres it's not going to be very good to drive.
I think F1 2010 gave GT a decent run for it's money on PS3, despite being 30fps. In the rain it was incredible. Shame the rest of the game was a buggy mess. I think that Wipeout HD was very impressive from a technical standpoint as well. Shift 2 had the best night racing, but again 30 fps and the rest of the game was a buggy mess. Burnout Paradise is still probably the best damage model. Horizon with it's open world and great atmospherics is right up there as possibly the most lovely to look at.
GT6 is very nice, and overall probably the best package, but there are definitely other games out there that challenge it in specific areas, even ignoring the standard models and tracks.
To me, graphical quality includes all that a game is capable of. But I'm happy to admit that GT6 at it's best is better looking than any other PS3/360 racing game at it's best.
I'll take real-time lighting changes over GT5p's baked lighting and shadow maps.
Personally, I think it's swings and roundabouts. You get real time lighting, but you get a less stable frame rate and the graphics get worse. And it's quite distracting in a field of cars with obviously limited light sources, when some of the cars aren't casting the light that they should be. There's something to be said for the GT5P/FM6 method of having presets that are just known to work and give solid results.
I think it really depends a lot on how sensitive you are to frames dropping, some people just can't see it and therefore don't see the problem.
Time change is great when you're alone on a track, but that's a small part of a racing game.