You really can't tell the difference. Im sorry, but have you even played Forza 3? The image is not a faked image, it is almost impossible to see the difference when your looking at gameplay or photomode. I am sure photomode has better graphics then gameplay for Gt5 and Forza 3. You can't rotate the camera a full circle around the car during gameplay (as I have been told), so how can you not say Gt5 photomodes are faked. I heard you can only do that in replay mode, and replay mode is probably better rendered then gameplay.
Gt5 has the better graphics over Forza 3, its pretty obvious. But not the 80% of the other cars. There is more screen tearing, fps flicks, and bad shadows in Gt5, I would not blame them, what PD are attempting with 16 cars with that much detail its bound to happen, especially on a console.
About the whole graphics battle. I do think its just depends on preference, eyecandy or performance. Both games have some of the best graphics in the industry. Graphics don't make a game, they just make a game better.