Does anyone know of any books, slides or blogs that talk about how they implement a good vehicle damage system? A guy who worked on Blur talks about theirs a bit here (http://www.slideshare.net/nonchaotic/spu-assisted-rendering). I'm particularly interested in GTA IV and how they implement vehicle damage.

I have no real experience with this, so consider this just an educated guess based on the Blur slides:

The "morph target" is just an artist's modeling of a fully banged up car. The "damage volume" is a very low-res, crude FEM simulation of some overall volume-preserving material with plasticity. Each cell in your damage volume is assigned to a part of the car model, and as a cell loses volume, you blend into the morph target. You also blend into dent/crunch textures for further effects. Maybe you also deform the geometry a little using the damage volume as a deformer using mean-value coordinates? All sorts of things you could do for some cool effects.