I must admit, I don't use internal view in Wipeout much. Internal view is good for games such as Gran Turismo, where they really make an effort to let you know you just hit something.
Wipeout. however, I feel requires a cognizance of not just your own ship, but how others may be viewing it. Using an external view allows for such extrapolation, albeit a "poor man's extrapolation".
It also lets you calculate and re-calculate your ship's position in lieu of any attacking objects (missiles, rockets, plasma, etc).