I've always been told that Steel is better for the strip and Aluminum is better for the street. Something about stored energy or something....i dunno lol. All i can tell you is that i love my aluminum flywheel to death and i won't ever switch back =D
I went from an iron one to a aluminum one in a truck I used to have and I didn't notice a difference at all. Aluminum is expensive as hell and I am probably just going to buy a steel one when I get my Spec clutch.
I have heard various opinions through the years but one that seems to be repeated is steel for small block and aluminum for big block due to the torque differences of the motors.
For drag racing I have heard those who run the lightweight fw say that if you let the rpm's fall too much you can't recover cause energy is lost due to the lesser weight of the fw.
I did drive a street car with an aluminum fw and you could not just let out the clutch from a stop without giving it some gas or it would stall and die.
In a race application, I would use an aluminum flywheel. It lets the motor rev a lot quicker through the powerband up to the shift point. In a very indirect way, it almost acts like a steeper gear. In a slower street car, heavy car, or something not making "that much" power, it's still debated whether aluminum is better than steel. As we know, steel would have more stored energy than the aluminum because it's heavier. Steel is much more smooth while the clutch is engaging compared to aluminum. The question is whether the aluminum can shock the tires as hard as a steel flywheel could. I don't see how it could, but it is still debated.