This is what I always assumed, we are contributing these articles to the various article sites - making them bigger which google will rank but they completely ignore the link backs within the articles.
We should be careful here about generalization. If a so called "article site" is nothing but a place people dump articles for SEO that have been copied or spun, its pretty easy to see why google would make sure these types of activities would not lead to a benefit.
However, there are also sites large and small that publish "articles" and have an editorial policy that might include covering a popular topic that other sites are also covering, or selecting news items that are presented to an audience composed of repeat visitors.
There are lots of sites that allow users to request their topic be covered, or otherwise "submit", that are popular, and people actually read the articles. There is a big difference there.
I don't think there is anything inherently wrong with an "article directory site". However, there is a need to improve the model and even the software that drives such sites. It is simply an example of an overused model that worked for a while, but now needs to be updated.