There's a menu setting to mess about with sensitivity and things. Then it works in arcade mode...Unless some 360 loving hobbits have made it to Mt Doom since I tried it.
Finally got it working!!
But only on Time Trial in Arcade mode, but it works great!
The mistake I was making was that I wasn't resizing the frame to fit my head, once I did this it started working really well!
From the cockpit view (The one where you can see the inside of the car)
Has anyone else used it on any other modes?
(p.s. This is without a 3D TV)