I tried shooting some footage at a local race track a couple weeks ago. I shot it in frame mode on a gl2 because most people "like the look". The replay on the LCD and my small monitor looked fine - but when I played it on a full size TV at home, I got this bad "strobing" action as the car came in and out of the frame. I had my shutter speed set manually and locked at 1/60.

I will probably shoot in normal from now on, but I'm wondering about shutter speed. Does it really matter, other than the effect it will have on f/stop and DOF? I could shoot 1/60 as this matches the actual scan rate (1/2 an interlaced screen per pass).

Most of all, I want the image to look smooth. I want smooth movement of the vehicles - not a strobe action. If I bump up to 1/500 or 1/1000 (plenty of light out at the track) - would I gain or loose anything?

Frame mode makes motion look worse. Higher shutter speeds will decrease the amount of motion blur you get and make your motion look worse.

Higher shutter speeds will indeed decrease the amount of
motion blur. Whether it will worsen the look of the motion
depends on certain things. It might stutter a bit more, but
you will see it more clearly. Experimentation is in order here!

Ditto the faster shutter speed comment. Also, consider the angle you have to the track. The closer you get to full 90 degrees the faster you will need, to be. You will shoot better with the cars comming and going, or from a more distant point. Some following of the cars with the lens will also help. You don't see broadside shots from Fox or any of the other channels, unless they are shooting from a distance back from the track.