I think the way iRacing deals with this is not too bad since you can't do miracles when it comes to networking.
It often seems like The i racing way of doing it is terrible ( its more a "not doing it" ) it ruins races just having cars flash on and off at random , Obviously like you said user numbers are an issue. i racing is half dead as it is with the faster cars on the road side so I guess they don't have a choice but to let people race with awful pings.
In fairness to i racing allot of races go without hitch from net-code and for me its been more of an issue with the absurd damage modelling when you do tap. Also maybe i racing actually has really good prediction its just that when people get outside of the limits of that you get the flashing , which to me would be more of an argument for not letting people race with awful ping's and packet loss.
Most FPS servers or other timing based games that are competitive will set a upper ping limit for users. Street fighter even has a frame rate limit presumably due to the way it synchronizes clients.
In the end there are many ways developers can get around some aspects of latency its just a question of development time , cost and the end goals of the product.
There will always be some sort of compromise and mismatch between clients but I'm sure it can be vastly improved from where we are at now in most games.
"auto" booting people to the pit from server option suggestion is simply a quick and simple way to deal with the problem no where near the best.
Maybe over the next 20 years or so we will also start to see internet physical infrastructure improve father reducing latency especially between continents , I was reading a while back that the hardware is there it just needs to be implemented allowing 30ms ping from china to uk.
