I think it's a nostalgia thing. Many gamers discovered GT1 5 years ago, and after about 2 years of that, the next one (GT2) came out. GT3 fowlled up about 1/2 years after that in the US, and now GT3 has been around for the same amount of time (at the time of this post).
A lot of GT2 fans (such as myself) started out with GT2 first, and fell back on GT1 later. GT3 came later, but the main argument against GT3 is the lack of cars, a lot of favorites from GT2 disappeared. Another complaint is that for the price of a new gaming console and memory card, the newest game isn't as the great improvment that was hoped for. Yes, the graphics are light-years ahead, but the competition still stinks.
There's even a lot of GT1 fans who swear the original's still the best. I tend to disagree; GT1 is a better layout for the simplicity of pure racing, but the car physics are a little nutty.
But if you started out with GT3, looking at anything else is a joke. Of course the graphics are better, but the AI's the same in either version (1 or 2)...GT2's only saving grace is the wealth of cars. And I haven't heard of a GT3 fan suddenly falling in love with GT1.
It all depends on where you began.