In both games, the physics are far better than any of the other racers like this.
The main difference added to the new one from Flatout2 is the "carnage mode". which sounds sort of like Carmageddon but instead of pedestrians, you try to destroy objects or each other to gain time. You can also race against twice as many cars and there are a lot more objects added to the tracks. That said, they still really need to make sure that they let people who already bought Flatout2 know this.