Here's a quick demo of the programming that I've done so far:
http://filebox.me/view/nvugm311wee2q
Controls:
-Arrow keys to turn
-Left shift to accelerate
-Space to handbrake
-Click left mouse button to spawn a bullet
To test the car damage, spawn a bullet with the left mouse button and drag it through the car. Bullet holes in the main body will look black because the chassis underneath the body is pure black. If you break off the edges of the car you will get a better effect. Here's a screencap of the real time damage.

I've got the programming side handled, I just need some willing people to do some of the graphics. I need :
-Top down views of several cars (more of a priority)
-Top down race tracks (not a priority now)
-Top down pedestrian animation (Gotta be a bit detailed... not just a blob like in STICKRPG)
-2D story graphics of some of the enemy racers (though there will be no real story)
-ideas
If anyone has some time on their hands and wants to trace some cars and stuff then give me a PM or post in this thread. I will be paying you nothing (great deal I know), but you'll get your name in the creds and stuff ect.ect and maybe if the game is successful I'll give you a cookie one day.