The question that you should really be asking yourself is whether the articles from article directories are good enough for your readers. The reason why the site that you saw using articles from article directories and still rank well in the search engines is probably because the site already has a following and the article republished on the site managed to get some inbound links, probably it is good enough.
Personally, I would avoid having a site that republishes content only from article directories because if my visitors are looking for content like these, they might as well be visiting article directories instead. Also, the fact is, most article writers publishes sub-par content onto article directories. Where do all the good ones go? Their own website. With this reason alone, I avoid republishing articles from article directories onto my own website.
Hey friends, PR and article submission are not relevant to the question here. Please read the question properly and add relevant replies in the future.