The Z-cars exceeded expectations. Which is great. Sales are good ΂- enough to sustain an incredibly ambitious development programme including the eagerly anticipated ZT 385 and X80 Coupe ΂- and the public is excited about MGs for the first time in years. But that brings its own problems. Now expectations are up. After all, if the engineers can turn the Rover 45 into a genuine Clio 172 rival, then sharpening up the MGF should be a doddle.

In fact the F was the first car to get a makeover under the new management. Back in May 2001, Britain's best-selling sports car spawned the hardcore, hard-riding MGF Trophy 160. Solid-mounted front and rear subframes and steering rack, re-valved Hydragas suspension and monster brakes turned the F into a point-to-point weapon. But the horribly vague steering and pummelling ride let the side down dynamically. Obviously the engineers knew the Trophy was just a stop-gap because there's now a massively revised MGF only nine months later.

Actually it's not an MGF at all. MG TF is the new title and it's worthy of such a distinction, such is the work that has gone on underneath the thoughtfully re-styled exterior. The Hydragas system, which uses fluid and gas as the springing and damping mediums, has been ditched in favour of conventional coil springs and dampers. Hydragas has its advantages ΂- an exceptional ride in most models being one of them ΂- but its properties are inconsistent. Air temperature affects ride height and efficiency, which could mean your MGF behaving radically differently from one week to the next. The coil over damper system is more consistent, cheaper to produce and has been tuned for the demands of enthusiastic drivers. The addition of trailing arms will help control the rear wheels when cornering forces build and ensure maximum rubber on the road at all times. It's a testament to MG's desire to be taken seriously as a performance brand that it is prepared to meddle with the most successful car in its market sector for the likes of you and I.

We're in Wales again to see just how far the MG TF has come from the unrewarding, slightly stodgy drive that proved so commercially successful. And we've brought along a couple of rivals to provide a benchmark. The first is the familiar and brilliant Toyota MR2. A member of our Fast Fleet for over a year, it continues to impress on a level that the MGF never attained. As a pure driver's car it is exceptional ΂- undoubtedly the evo choice in the roadster market. A less obvious rival is the Peugeot 206 CC. Based on the mechanicals of the 206 GTI, it promises strong performance, unrivalled weather protection and practicality to shame any traditional roadster. It is, perhaps, a car that represents what the MGF used to be: comfy, easy to live with, the safe option. Whether it will cut it on the uniquely challenging roads draped haphazardly over the Black Mountains remains to be seen.

Typically the sky is grey and swollen with rain when I'm handed the keys to a fully-specced TF 160 complete with sports suspension (10mm lower than standard). Nevertheless, the TF looks great. The blobbiness of the old MGF is gone, replaced with sharp lines reminiscent of the Aston DB7 around the grille and front headlamp arrangement. The 16in wheels seem to fill the arches more convincingly and the multi-spoke design is obviously inspired by another Newport Pagnell product ΂- the Vanquish. The TF looks aggressive, pert and classy ΂- particularly in photographer-unfriendly Moonstone Grey.

Co-editor Barker and contributor Roger Green are staying about an hour away from our base in Tewksbury and the morning dash over to meet them is in torrential rain. The TF shrugs off the dreadful conditions, feeling grippy, swift and somehow tougher than before. Our biggest gripe with the MGF was its steering. The variable electric power assistance never weighted up enough and provided minimal feedback. Turning-in at speed was a leap of faith and tempered your cross-country speed as well as your enjoyment. The TF still has the variable assistance but is fitted with a quicker rack which weights up much more as the pace quickens. It may not be the last word in providing clear, textural feedback but the improvement is immediately obvious. I arrive feeling confident that the MR2 may not have it all its own way.

Clambering into the Toyota, I'm not so sure. The driving position is spot-on and though some of the plastics are a bit hard and shiny, the clean design and ample space make the TF feel decidedly old-fashioned. The rather lurid furnishings of our MG TF don't help. Barker sums it up neatly: 'I wouldn't be surprised to see Playboy Bunny logos dotted around the red and grey interior. Very 1980s.'

There are more subtle trim options, but you won't escape the feeling that the TF is one size too small for most people. You sit high and reach down to the small, thick-rimmed wheel with legs splayed uncomfortably to avoid rubbing against it. Roundabouts can be a problem as your legs literally get in the way when you apply lock. MG couldn't change the fundamentally flawed driving position without re-homologating the whole car ΂- a prohibitively expensive and time-consuming process. Roger Green finds this particularly irksome: 'If outside the TF looks like a scaled-down Aston, inside it looks and feels like a scaled-down car too.'

The Toyota's already ahead then. But after a brisk sprint up to our photo location the MR2's case feels suddenly more shaky. It's raining again and at the tail of the pack I'm struggling to keep pace with both TF and 206 CC. In these conditions Japan's baby Boxster feels disconcertingly tail-happy. Even at low speeds the MR2 will take on a few degrees of attitude and requires all of your concentration on a challenging road. Fortunately the incredibly sharp and feelsome steering makes holding onto the MR2 less of a chore, but you wouldn't want your mum to drive it through a cold winter. Understeer can quickly be followed by roll oversteer in the same bend ΂- a trait that seems much more pronounced since we swapped from Bridgestones to Yokohamas.

By contrast the MG TF feels massively secure along the same stretch of road in similar conditions. Turn-in isn't as sharp, but this allows the rear to settle and find much stronger grip. There's still substantial understeer to push up against in extremis, but push through it and you'll find just a hint of a slide on the exit from tighter corners. More often it will spin its power away before regaining composure and catapulting you on to the next corner.

The 206 CC is a very different proposition. It shares the TF's awkward, perched driving position but feels much more conventional ΂- taller, more upright and less focussed. Fast cornering involves much more roll and much less adjustability. The 206 grips well but ultimately the chassis is one-dimensional. Understeer is the preferred stance and no amount of provocation will induce lift-off oversteer. It will tighten its line mid-corner, but it fails to come alive when you want to have a good time.

Looking back 15 years, the 205 GTI and its convertible sister the CTI were rightly revered as lithe, responsive and involving cars to hustle. The CC feels simply ordinary in this company. Its performance isn't in question ΂- it hung on to both TF and MR2 with little drama ΂- and it steers nicely, but on the evo scale it's not in the same race. Its novel roof and day-to-day practicality give it undoubted appeal, but in this test it's a side-show. Fortunately the main event is hotting-up nicely.

As the day wears on, the rain abates and standing water becomes less of an issue. The road still has a thin film of water across it but the MR2 is starting to feel its old self again. Outright grip is slightly lower than that of the TF but the way the Toyota flows across the most difficult and unpredictable of terrain is breathtaking. You're always aware of that zingy engine mounted high behind you ΂- much more so than in the TF ΂- but it soon becomes natural to use the balance it provides to wring the most from the supple chassis.

The whole car seems to pivot around the engine, and in such a fluid way that nailing an apex becomes instinctive. If there is understeer it is easily quelled with a slight lift of the throttle, while a heavy right foot will load the rear of the car up beautifully out of a bend. The MR2 is not a car with which you take liberties, but over time you'll relish the thrill of mastering its tail-biased balance. Roger Green knows the little Toyota well and is smitten: 'Despite having driven several thousand miles in this car I'm far from bored of it because every time you drive the MR2 you learn another facet of its character. You have to drive it, too ΂- it demands your concentration.'

The TF is far less demanding to drive quickly. It grips heroically and matches the MR2 in a straight-line tussle ΂- things the MGF could always do ΂- but now there's much more pleasure to be had from pointing the MG along a good stretch of tarmac. The MGF was hampered by the poor geometry control of the rear suspension. To combat the evils of lift-off oversteer ΂- always a consideration with mid-engined cars ΂- the rear wheels were designed to toe-in (steer in the opposite direction to the front wheels) if the driver backed off mid-bend. This aided stability but the MGF had so much toe-in that any hope of steering the car on the throttle was lost. It also meant that when overall grip limits were exceeded the rear wheels accelerated the resulting slide. In short the MGF was a resolute understeerer with the nasty habit of spitting you off the road backwards if you pushed too far.

The TF still has the built-in safety mechanism of toe-in, resulting in a natural tendency to understeer. However, it is now more tightly controlled, and if the understeer gives way to yaw (oversteer) the toe-in is neutralised to allow more progressive breakaway. MG's engineers say the TF is more predictable, more stable and more fun. And they're right. The MGF wouldn't have stood a chance against the inspired MR2 on these roads; even the 206 CC would have entertained more. But the TF is different. Composed but not inert, the ride is supple enough for town driving but on the wicked crests and dips over the Black Mountains it endows the TF with body-control that's iron-fisted and resolute. Both the MR2 and 206 CC feel slightly floaty by comparison.
Performance is strong but not decisively better than that of the less powerful but lighter MR2 or the torquey 206, but the mighty brakes allow an ultra-aggressive driving style. The MR2 has a long pedal feel in comparison and triggers its ABS earlier. The TF positively encourages late-braking heroics and the chassis loads up predictably with a hint of understeer in fast road driving.

We're all convinced that the TF is a massive improvement over its predecessor. After a pulse-quickening charge to another photo location Barker reports he's pleasantly surprised: 'The TF is the best F I've driven. Loads of grip and simple, well-communicated responses when you're pushing at decent road speeds. When you do start attacking corners it'll benignly understeer. Dive in and back off and the tail stays glued.'

Green chips in: 'There's more beef to the driving sensations, too. The steering has more weight and feel, and roadholding has improved. It's a significant improvement in all areas of the driving dynamics.'

Enough to topple the MR2 from its reign as roadster champ? Almost, but not quite. As Barker says: 'The MR2 has the best ergonomics, gearshift and chassis feedback. It's the most fun and fast enough, a polished little roadster that demands the driver's input and dishes up rewards when it gets it ΂- it has to be the evo choice.'

Green, too, prefers the MR2. 'The chassis encourages you to push on and the messages it sends are so clear that experienced drivers can play with it. Neat, satisfying and always entertaining.'

The MG TF160 is a massive improvement on the F and another clear sign that MG can produce genuinely exciting cars. It relegated the 206 CC to little more than a distraction in Wales and for the first time mounted a serious challenge to the MR2. But the more we drive the Toyota the more we admire it. It is an exceptionally sensitive and rewarding device ΂- a car that teaches you more about driving than anything else for the money. The fact it costs ΂£2000 less than a TF160 puts the conclusion beyond doubt. Barker's final thoughts are telling: 'It's a daring car because it is so different in the wet compared with the dry. It demands respect. For those who dream of owning a 911, the MR2 offers an appealing and cost-effective apprenticeship.' Knowing how he feels about 911s, that's praise indeed.