I tried the Viper Team Oreca of the Arcade S list and it cornered really good, so I thought maybe the cars from that S list are tunned, but then I tried my Viper and it did handle good, then I tried the Zonda and it cornered good too so I thought , damn this is a big fake. I mean why dont the real settings of the simulation mode apply to each car in the arcade mode. To make more fun and real.
Arcade and Sim are kind of identical in terms of the way the cars handle. Turn off ASM and Traction Control and that should even it up. Also when you choose sim cars in arcade mode they handle the same as you have them set up in Simulation. (no matter wat the ASM and TC are set as)
Arcade really just refers to the ease in which it is set up. You have lot's of cars to choose from, and you beat a series of short races unlocking more races (and cars) as you progress. And at the end you get a nice video.
I look at it as a quick fix mode, when you just want to jump in and see what the game (and the better cars) are like early on.
The question is, your asking if the cars if your garage keep the modifications you give them when you load them in the arcade mode? Answer: Yes they do.