Why wouldn't shadows get AA like everything else?
Antialiasing helps with geometry edges. Shadows are not geometry, they're textures.
Textures are not antialiased, but they can have filtering. Unfortunately, this is not true for shadowmaps - they cannot be filtered and even if you would filter them, this would not make shadow edges look any different. This is because what you see on screen is not shadowmap texture, but result of shadow test made using that texture.
I will not go into details, but any filtering or antialiasing we have in your graphics cards just doesn't apply to shadows. Game developers need to use some advanced techniques if they want to soften their shadow edges. The better the result, the more complex the technique required or more performance impact it has.
...the sawtooth shadow edges turn in to a mass of pixelated shimmering that looks like a 1990's video game. I hope we can do better than that.
I recently played Deus Ex HR. It got me thinking - why people keep comparing rF2 to 90's games if this 2011 blockbuster is in many aspects behind rf2? Shadows, for example, are of far lesser quality than what you can see in rF2.
I think it's because people get so used to technology, that they forget where we were 3-5 years ago. But truth be told - technology is not some magic - it's limited like everything else. If we don't get smooth shadow edges in every game, then we're not there yet and we need to wait a few more years. Right now some more advanced engines perform blurring of shadows, but let's not forget that these are made by companies making big bucks and investing that back into development time. They've been doing this for years and are ahead of smaller companies. You only need to look at
this article to realize just how much research has gone into antialiasing techniques at some game studios. Seriously, I wouldn't be surprised if they had one person working for a couple of years almost exclusively on subject of antialiasing
Personally, I think shadows in rF2 are programmed pretty good and the only problem is that some tracks (even ISI ones) don't have them setup very well.
You can try Croft circuit by feels3 - you will see shadows have much higher quality there.
Also, the problem typically goes away when the objects/shadows are closer to the user POV. So how do the shadows that are close get AA, but not in the distance if shadows always have sawtooth edges?
No.
Shadows closer to observer use higher resolution shadowmaps. It's the same in pretty much every game that uses shadowmaps in open spaces.
And by the way, my question was related to 880 versus earlier builds.
This is why I commented, that you should post some information. Sometimes people try new track and have problems that they blame on recently installed build (because they didn't have these problems before). This is why first reaction is always to ask about circumstances

Also, what I mentioned about being used to technology - some people report normal behavior as bugs, simply because what they get is below their expectations, so they consider it an issue
It's important to "prove" somehow, that your claim is reasonable, so that it can make it to development team, and not just to the forum. This is why I also mentioned posting in forum section dedicated to bug reports. Show comparison with the same content and the same setting between current and previous build.