I think it depends on your sound system. There's a video out the displaying this disparity.
You think well.
Difference of sound with proper 5.1 and good sub in Theatre mode is vast compared to stereo or Living Room preset.
As Polyphony said above, further difference exist between Small/Large Theatre, where GT5's sound excels in Large Theatre mode. Unfortunately, due to very pronounced difference in levels of Menu BGM levels and in-game sound levels, Large Theatre is somewhat complicated to use.
Another thing I have to highlight is actual work done in 2.02 update regarding dramatic improvement in the overall sound-spatial *picture*, probably the most important upgrade in sound so far. After 2.02, the sound-placement is presented with great accuracy regarding *position* of sound. Every tire sound is *placed* on appropriate channel (front left/right speaker, rear left/right speakers) and mixed in the real-time. Also, engine positioning in the car determines the direction of engine sound - central speaker for the FF and FR cars, rear speakers-mix for the MR and RR cars. Same goes for exhaust-sound positioning, where activation of particular channel for exhaust is determined with actual placement of the exhaust on the particular car.
For example: Cusco Impreza is an FR car with exhaust positioned behind the front-left wheel. In the 5.1 setup, engine sound comes from the central speaker and exhaust sound is coming from the front left speaker.
Loss of grip on particular tire is clearly presented with audio-sensation, where appropriate channel is activated when tire is slipping. Same goes for the sound of the other vehicles in proximity. You can clearly resemble the actual direction of car approaching from behind and when you're tailgated, the sound-direction on the rear-channels is swaying left-right in the real-time as car behind is changing it's position on your rear. Another beautiful detail is how actual engine sound of the car behind depends of its actual configuration and position of its engine. If car behind is FF/FR, the engine sound will be more pronounced and will be more pronounced in the mix of your exhaust than MR/RR car.
Also, when you're approaching cars in front, their exhaust/engine sounds becomes more and more louder, heavily dependable of the type of exhaust they're using and their engine placement. Racing exhausts of cars in front can totally "cover" the sound of your FF/FR engine, as they would in real life. Best example to experience this is to take Mazda Roadster TC (from the October DLC) and take it on the One Make Race on any track. Proximity sounds really shines on that car because of the actual engine and exhaust notes.
Large Theatre mode is a heaven for the sounds during passing, where sway from front to the rear is greatly presented on the appropriate left/right channels, depending on the side you're overtaking the other cars.
Notice how all above is properly experienced only when using cockpit and bumper view. In Chase or Roof cam complete sound mix is influenced by virtual position of the car. Chase cam makes exhaust sounds greatly exaggerated and basically *kills* all other sound sensations while Roof cam takes majority of sound from just above the engine-bay (that is why the turbo-piffs are heard best fromthe Roof cam), in the same time neutralising exhaust and tire sounds to some extent.
Of course, there are many cars in GT5 that *could* sound more accurate - especially the V8 and V12 engines which lacks some of the grooling sensation - but I find majority of Premium cars and many *attractive* Standards sounding phenomenal.
I also agree with Polyphony above how overall sound of cars in GT5 is not yet on the level of PC games, but calling it bad or something like that is just not right.