Turn 10, of Forza Motorsport fame, refuses to compromise render rate in the series. Forza 2 to 4 (no idea for the 1st one, which ran on the original Xbox) are running at a steady 60fps (physics loops at 360ips), even in split screen (at the cost of a few effects, notably cockpit mirror reflections). Technically this really matters when getting the braking point at 400kph down Old Mulsanne. In terms of enjoyment, sure there's only reduced antialiasing, but driving down Bernese Alps close to the guard rail in Forza 4, especially with Kinect head tracking (not enough cash nor room for a triple-head+seat setup), is incredibly immersive.
Forza Horizon though, developed by an all-star team[0] distinct from Turn 10, chose to drop to 30fps, notably for full AA, effects such as motion blur, and features like continuous day/night cycle and realistic car headlights (old bulbs look deliciously warm, and the chromatic effect on the crisp edge of xenon headlights is awesome). As realistic and gorgeous as Forza Horizon is, at speed it feels buttery smooth but not exactly crisp as Forza 4 is. It's like you'd take a low-resolution image and try to make it look nicer by using a blur filter, only this applies to time instead of space, and thus movement.
I think the main issue with Horizon was actually the open world, even with some serious LoDing that proved render intensive. Also the motion blur as you mentioned. There's always trade-offs to be made, and the 360 isn't getting any faster.
One thing I think perhaps more studios should try is running the main game loop at a different rate to the render loop. As you rightfully pointed out, the physics simulation runs at 360fps in Forza, similarly there's nothing to stop the game from double-buffering some of the game state and running the game at 60fps (including input). Part of the big issue of 30fps games (especially racing ones) is that the input lag becomes much bigger than in 60fps. You're normally looking at at least two frames of input lag - one to process the game, one to render it - so at least 66ms minimum for any button press to take effect. It normally tends to be about 100ms for 30fps games, and 50ms or so for 60fps, which makes the game feel a lot more responsive.
Well a better example would be Ground Turismo 5 which runs in 1080p @ 60fps, but that's besides the point. Games that look good in screenshots will always sell better.
GT5 is definitely not a better example, because it suffers huge framerate drops in some situations, which completely defeats the immersion effect. Try a race in cockpit view and multiple cars in front of you, when one goes off track creating some sand clouds, the framerate often dips far below 30 fps.
What makes Forza 2 and 3 so impressive is that it keeps up 60 fps all the time. If you a game can't keep up with that, I'd much rather have a constant 30 fps than an erratic 60 fps.
Forza Horizon though, developed by an all-star team[0] distinct from Turn 10, chose to drop to 30fps, notably for full AA, effects such as motion blur, and features like continuous day/night cycle and realistic car headlights (old bulbs look deliciously warm, and the chromatic effect on the crisp edge of xenon headlights is awesome). As realistic and gorgeous as Forza Horizon is, at speed it feels buttery smooth but not exactly crisp as Forza 4 is. It's like you'd take a low-resolution image and try to make it look nicer by using a blur filter, only this applies to time instead of space, and thus movement.
[0]: http://www.eurogamer.net/articles/digitalfoundry-the-making-...