Irfan Naseer, 31, and Irfan Khalid, 27, travelled to Pakistan for terrorist training before returning to the UK in July last year, jurors at Woolwich Crown Court were told yesterday.
In one conversation, Naseer was heard agreeing that the July 7 attacks had not done enough damage because there were no nails in the bombs.
The two men, along with Ashik Ali, also 27, are accused of being central figures in the alleged plot.
Ali told police in interview that the plan had involved him wearing a suicide vest as well as carrying a gun, the jury heard.
The group also discussed the use of poisons and attaching blades to the side of a vehicle before driving it into a crowd of people, it is claimed.
Prosecutor Brian Altman, QC, said: "The police disrupted a plan to commit an act or acts of terrorism on a scale potentially greater than the London bombings in July 2005 had it been allowed to run its course.
"The defendants were proposing to detonate up to eight rucksack bombs in a suicide attack and/or to detonate bombs on timers in crowded areas in order to cause mass deaths and casualties."
The men deny engaging in conduct in preparation of terrorist acts between Christmas Day 2010 and September 19, 2011.
Naseer is accused of five counts of the offence, Khalid four and Ali three.
For Nasser, Khalid and Ali, all from Birmingham, this is alleged to have included planning a bombing campaign, collecting money for terrorism and recruiting others for terrorism.
Nasser and Khalid are also accused of travelling to Pakistan for training in terrorism.
While in Pakistan, prosecutors claim Naseer and Khalid received training in how to use weapons, how to make bombs and poisons, and also made suicide videos.
The trial continues.