So, I just finished capturing some direct feed audio from both Forza 3 and GT5 trying to compare the same car's sounds on both games.
I used the same cars(unmodified),same views(cockpit),same stretch of road (Nurburgring).
The results imo do indicate that Forza does have better engine/exhaust sounds. FM also has better shifting effects,uphifts and downshifts,overruns..etc
The interesting thing here though is the recordings of GT. When I captured Forza's sounds, the playback was excellent,high fidelity..etc, hardly any distortions. But when GT's sounds were played back, there was so much distortion,so much boom(bass) that the engine sounds were nearly muffled out. I've read quite a few poeple's complaints that the audio from GT has too much bass and I completely agree.
Now, I remembered that GT offeres the 'living room,small and large theatre' audio modes. Well, for those who are interested, the 'living room' option had the most bass/booming out of all the modes. The 'large theatre' mode had the least and had less distortion,less bass and the engine notes could be heard alot better when the recordings were played back, but still,even then, Forza's sound's were still better.
Anyway,just a little observation for those who are interested. If you want less booming in your sounds,use 'Large theatre',you want the bass,use 'living room'.