To correct what I wrote earlier in this thread (uh-oh), I've just noticed that when you upgrade and your car score goes up, the opposition don't actually change (they seem to try harder, but it's probably coincidence), and when your car changes class, the other cars don't change class with you.
When you select a race you can press an "opposition" button, and it gives you the list of people you'll be racing (names like C. Shaw or whatever) - they never change, and their cars never change. So if they all have D-class cars and you upgrade your D-class car to a C-class car, you will steamroller them. Which is a bit of a bastard.
You can, of course, choose to perform upgrades that keep your car within a certain class, which means you won't be able to "cheat", as such, but the option is there.
Not too worried though, because some of the later races are extremely hard. So far I've had to resort to nudging cars off the road twice to gain a gold, otherwise it's near impossible, such is the AI.