PS3 / 360 - well, lots of reasons for getting each. I've used both, but own a PS3. I think it's better as a media center type console, particularly if you hook up to HD telly - but your not going to, are you? If you're not, then the PS3 can go to VGA, but needs a cable ('bout 20 quid).
I replaced my DVD player in the front room, and it worked really well with decent upscaling for DVD's and Bluray has won the battle with HD-DVD (which is what the Xbox was going to support).
Additionally, the PS3 (not sure on the Xbox here) can wirelessly connect to a network and with little effort on your PC you can stream video, internet, your pictures, etc all from the comfort of your armchair.
The games... well - swings and roundabouts. PS3 hasn't been out for long. It's a bitch to develop for, BUT has some reasonable advantages over the 360 with regards to memory, and oomph, so I'd expect games to come to end up being prettier and better on PS3.
360 install base is *much* bigger though, although they've had a few years head start with that, and a price advantage.
As previously mentioned - 60Gb model did *some* backwards compatability - but if I were you, I'd read that as 'none'. It's terrible. They try and emulate several parts of the original PS2 hardware in software, which usually spells disaster, and in this case I think did.
Back on track... (you like racing titles)
...GT5 - Prologue. Is brilliant, but I wouldn't play without a decent wheel and pedals. It's fantastic fun to drift an M5 round some twisty Alpine track - but it's just not the same on a pad. Particularly the cheap and tacky PS3 pad (which doesn't come with rumble as standard - unless they're now included in the console packs).
...SEGA Rally. Decent good fun in an arcade style. Came out on 360 too though. Again - great fun with a wheel, but 10x more chuckable than GT5.
...Colin McRae : DiRT from Codies. I had great fun with this too, although it's a bit more serious than Rally. Took a bit of time and patience getting in to the swing of things but it looks great.
...Need For Speed / EA Racers. I've been disappointed with these for a while. Last couple of racers EA put out have missed - with sales being driven by hard marketing.
Alternatively to alllllll of that - why not blow the dough on a decent wheel and pedals (Logitech G25 is brilliant) and get your PC hooked up to some driving games that way? There's some decent games out there for the PC. They tend to be cheaper, and if your PC's half decent then you can spend hours driving with similar feel and handling as GT5 on a console...
...this'll be the longest post I've made I think

Hope you have fun whatever you go with...