EDIT 2: Found it! Game is called "Skydrift".
Its an air-plane racing game where you can pick up weapons and power ups, and I think (really not sure about this) that all the planes were old-school propeller planes. It was an xbox live Arcade title I believe, but again, I can't be positive about that. I Read about this a little less than 2 months ago on either Kotaku or Joystiq (already tried searching both sites with words like "plane" and "race"; no luck). Someone please name this game!
Also, for those pc gamers that think this sounds familiar, this game looked EXACTLY like "Plane Crazy" which came out like 15 years ago... thats why i want to play this!
EDIT: Game may not have come out yet, the article I read ~2 months ago was a preview.