AM is perfectly fine for BYB (back yard bashing), fooling around or even serious driving. They're very reliable, durable and responsive. The FMs are better and well known for their longer range and not crossing frequencies. They have more functions and options as well.
Just remember, they wouldn't sell AM radios if they were craptastic. They're just right for someone on a budget, a newbie or anyone who just wants a basic, no frills radio that works nearly as well as their more expensive counterparts. As long as you buy a reputable name brand, such as Futaba, you can't go wrong!
I personally just got this
http://www2.towerhobbies.com/cgi-bin...I=LXEDP1**&P=3 a little over a week ago. It's awesome. The ONLY similarity in this radio and the stock one is the shape of the tx (transmitter). Notice the package I got has the S3010 High-Torque servo and an S3003 standard. Go with this package, whether you get it from Tower, ebay or an RCU ad. The HT servo is great for steering. It holds it's position much better than the S3003.
Here are some ebay options -
http://search.ebay.com/Futaba-2PH_W0...opZ3QQsbrsrtZl