From the BMW Digest
This thread was discussed there just a couple weeks ago. The first is from a good, experienced driver with a CSP '95 M3. This was discussed in detail not long ago. Lightening the flywheel cannot result in increased steady state horsepower as measured by a dyno. After all, the flywheel is not an energy creating device. However since a flywheel does absorb and store some of the energy generated by the engine during acceleration, a lighter flywheel does result in increased transient state energy delivered to the rear wheel, and some therefore measurable acceleration improvement.
It would be possible to calculate these gains. However to do so one would have to know the inertia of both the stock and lightened flywheels, not their weights. Flywheel weight alone is not a good measure of the effectiveness of a modified flywheel. Indeed it would theoretically be possible to have a heavier than stock flywheel which nonetheless had lower inertia (although I can't imagine why...).
Neil's comments are right on the money, and describe the effect well. No one ever said that a lightened flywheel would increase horsepower, but it sure does *decrease* acceleration times. Herb Adams, in his book CHASSIS ENGINEERING, says that "..the effect of reducing rotational inertia on driveline parts has 15 times the benefit of just reducing the weight of the car." I have been intrigued with this statement for months, and wish that I had followed his suggestion a long time ago and gone to a lightened flywheel. I am not an engineer (obviously), but I do have enough seat time to have a fairly refined butt dyno, and I can tell you that the difference in how the engine spools up is not subtle, but positively sensational. I wish that I had done some quarter mile times (yeah, sure, I go to the drags all the time) before I installed my lightened flywheel, so that I could provide reliable, numerical evidence. I didn't, so believe what you choose, but I can think of absolutely no reason NOT to go to the lightened flywheel. It is the single most important modification that I have made in quite a while, and I have made quite a few.
As far as perceived acceleration goes, your engine sees the mass of your car as a point stuck way out on some lever arm that it has to twist. If your engine is direct drive (i.e. no gear reduction), and you have an M3, you'd need quite a bit of torque to get that 3175 lbs moving faster. So somebody invented gears, which has the effect of changing the length of the lever, as far as the engine is concerned. In an M3, for example, first gear is 4.20:1 and final drive is 3.23:1 so what looked like 3175 lbs to the engine out at the end of that lever without gear reduction now looks more like 234 lbs (3175/13.57), assuming your rear tire has a radius of one foot give or take a few inches.
Suppose you had a magic flywheel with all the mass concentrated at the outer edge. Now the flywheel is stuck directly to the engine, so you can't reduce its effective moment via gearing. The only way you can reduce the moment is by lightening it and/or changing its mass distribution. If you could somehow remove 10 lbs from the rim of the flywheel, and the flywheel's radius was also one foot, then that would have the same effect on acceleration in first gear as reducing the mass of the car by 10x13.57 or 135.7 pounds. Now I am guessing the flywheel's radius is more like six to eight inches or so, so 10 pounds off it's outer edge would have the same effect as reducing the car's mass by more like 70-100 pounds (in first gear). Only you can't take that much weight off the edge, and moments of disks look more like 1/2mr^2, etc. etc. Point is that in first gear, the mass of your car appears to be only 20-30 times that of 10 pounds out at the edge of your flywheel, as far as the engine can tell. So the reduction of weight of the flywheel begins to be pretty significant. Expect bigtime effective acceleration improvements in first gear for proper flywheel lightening, similar to what you'd expect from reducing the weight of the car by anywhere from 70 to 100 lbs or more. The benefits decrease in higher gears in proportion to whatever the ratio is.
Obviously, the lighter your car is to begin with, the bigger an acceleration improvement you'll see since the flywheel mass represents a larger portion of the perceived mass of the car.