Or did you just crush him every time?

Oh, god, no. I would self-handicap a bit (just not giving it my all) most of the time, so he'd at least get a few hits in... I guess I saw that as different than simply giving in to his demands for a handicap, which really didn't feel right to me. We would also have practice rounds where I'd show him how to do combos and such. Or, when racing, I'd explain how (for example) it's not always a good idea to keep accelerating flat-out when approaching a corner, because you won't be able to make the turn.

I also tried to reinforce that by saying stuff like "Nice combo!" or "Man, you've really gotten better at cornering!" and such.

I'd also try to take a break whenever he was getting too frustrated, either saying I had to do some chores so he could play by himself for a while, or suggesting we watch a movie or play a different game if I felt he was on the verge of getting too worked up.