(sorry another long answer)
I set aggression very low in the menu (currently I am using 5%), and also vary it in the talent files, for open wheel racing in particular I find lower settings make the AI more aware of me and they behave more realistically, i.e. they do not constantly bang into each other or into the back of me. Don't worry, with damage at 70 or higher, they still have some clashes and lose bodywork.
The track situation is a difficult one - many are reasonably similar in difficulty, but some are certainly very different. But first you have to eliminate the possibility that you are slow in a certain bend or sequence of corners. In truth it is where I spend most of my hobby - I go to practice, and I spend AGES practicing, trying to get the best lap time I can, and then editing the AIW/gdb/tdf until the AI match me at 95% difficulty. Only then do I race it. In this way I gradually build up a set of these files for my offline racing. (trouble is, I keep starting all over again when Reiza bring out a new set of cars!)
It is painstaking, but it is really worth it, and I am getting my best offline racing ever with the new Extremes.
yes the aggression setting definitely affects the way the AI drive - setting it higher makes them more likely to spin on chicanes or go for overtakes but also to crash or hit each other. So I set it higher for tintop racing and low for open wheel.
So yes, they will definitely crash - even at low aggression, I see cars retire due to an accident - but you are more likely to see it at a street circuit, where the walls are close.
Engine or other failures? - on default settings, this is not so likely (can't remember the numbers offhand, it may be virtually impossible on default settings). But it is easy to change - go into engine file & look for engine lifetime & engine variation lines.
Change the numbers (in seconds).
So for example if you set lifetime to 7200 that is an average lifetime of 2hrs.
Then set variation to 3600, and the engine might fail anywhere between an hour & 3 hrs.
NOTE there may be more to the calculation that I don't know about, but after a LOT of testing, I have confirmed it does work pretty much this way.
Retirement reasons from this setting can be listed as engine, gears, or brakes. Other reasons are suspension, accident, or fuel (not sure I've ever seen puncture retirement?).
I definitely recommend editing this if you like good offline racing - apart from being able to set a realistic retirement rate, it really adds to the immersion to see a car smoking or even on fire as it pulls off the track.
If Reiza should read this, I really really hope they will not hide any more of these files, they are so important for us offline racers
