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I also don't think the dash view, with undrawn wheel, is right either. Anything that is cutoff at half the dash is wrong, as it's like seeing out of one eye. And, if your wheel is in your hands, the dash should be much closer to you than up on the TV screen. That's about where the center of the hood should be, which is about where bumper cam is, for someone who sits at a reasonable distance from a large TV.
Image your TV is a piece of glass. Take it with you when you sit in a real car, and imagine where your TV would sit if the seat of your car were your rig for your FFB Wheel. Your real dashboard wouldn't be on the other side of the glass (what is represented inside your TV). It would be between you and the TV. It's a pretty basic concept.
The problem here arises with how far you sit from the set... since that is not static, there isn't really a right or wrong. I figure in games the rule is you pretend the screen is your eyes. In an FPS I see the gun on the screen 10 feet away from me, IRL the gun barrel wouldn't be anywhere near that far away, but that's the sacrafice you make with games. The whole presentation of games is based around "eyeballs are the screen" positioning.
Theoretically if you put your steering wheel right up against the screen and put your pedals under and behind it like at a desk, the cut off steering wheel is a pretty close approximation.
If you are sitting across the room on your couch there is no reasonable camera as the screen is probably further away from you than the front of a real car would be.
While the realism is pretty hard to get truly right (I would think perhaps a projector screen with a big hole in the bottom to mount the wheel base through would be as realistic as possible.
So within reason it seems the ability to simply chop off the wheel on screen and show the rest of the dash is as good as you can get... to have the dash actually in front of the screen you would need peripherals to attach to your wheel/ps3 and as said, there is nothing that can be done about the fact you may be sitting a full car lenght away from your screen in the first place...
Duplicating the wheel on screen seems like a potentially necessary evil. Sure it means you see two wheels, but when playing with a controller you see a controller and a wheel... IRL you don't sit in the back seat of a car with a DS3 and control the steering wheel way in front of you either...