Ray: The main intent of the Tech demo was to do 2 things. First, to test their licensing system.
Second was to fix any random compatibility issues with hardware. To make fixing those kind of issues, you want to make the potential issue cases as few as possible to focus on the core elements like the graphics engine or sound engine. You don't want to complicate those things by adding more things to go wrong like adding damage.
Those other things like damage will come in a real demo, whenever that occurs. Also having driving aids isn't inherently arcade, especially if they're aids on a decent physics model. You take the aids off of Forza, it's still a crappy sim. You take the aids of off AC, it's still a great sim.