Reference frames
40-40 and 80-0 collisions are the exact same event viewed from different reference frames, if you ignore friction etc. They will therefore do precisely the same damage. If you cannot ignore friction (e.g. one car has brakes on, as PeteSF mentioned) then the 80-0 might do slightly more damage.
The kinetic argument doesn't hold, because you have to look at change in kinetic energy, not just the initial kinetic energy. In the 40-40 case, initial kinetic energy is 2(1/2.40.40.m) = 1,600m, and final is 0 (assuming inelastic collision). In the 80-0 case, initial kinetic energy is 1/2.80.80m = 3200m, and final kinetic energy is 1,600m (because the cars will both be moving at 40mph after an inelastic collision without friction.) Therefore, the kinetic energy lost in both cases is the same, 1,600m.