You really need to get pretty beat up to have any damage sustained affect your car. Getting creamed by Rusty while careening across the track will end your day immediately however. In shorter races, cautions are also non-existent, unless you cause them, but you ll be out of the race at that point anyway. One thing I found particularly annoying was crashing on a road course. Car views toggle automatically upon impact, and it gets confusing trying to correct your car, and toggle back to your preferred view.
Realism is very good, and often excellent.