As Task said: the AI cheats, but that was probably the only way to make it really competitive while adapting it to the player's skill.

Sure the rubberbanding is kind of annoying, but if the Elite AI consisted of ships making "fixed" times, it would be very frustrating and hard at first (this would basically require to do a good TT... and this would be too similar to the actual TT, with more handicaps.), then once you got past the skill level required, you would almost constantly win. For instance, I do not think the AI ever do BR, while the player will at some point start to master it (if you are going for Elite races, you are also likely to do Elite TT and SL which I believe requires you to throw in a couple one). Doing a BR in a race is more risky but if it would give you a substantial lead out of most weapon's reach...

Sure, maybe the AI could have been better. However, while I am no expert, it is possible that programming an AI for a racer might have its own difficulties. In other types of games, the AI can try to flank you. In WO, apart from being faster (or slowing you down more efficiently), well...

The Autopilot does have strange racing lines... and it is not immune from sending your ship off track