...when played through the 360? For example, I hear Toca 3 is backward compatible on the 360. If I use the 360 wheel with the 360 on this title, will it work?

It works great with Forza, but of course you don't get any force feedback effects with the old games.

Does the vibration effects work? I just got the wheel and I was thinking of getting Forza again to practice.

The wheel does not work with Colin McRae 04 or Rallisport Challenge (despite the fact Rallisport supported wheels.) When I say does not work, I mean unplayable (also Need for Speed Carbon, but that's a 360 game.) It works great with Forza, despite the hiccups. Don't remember if it does vibration.