I've been curious about this too. I've also read this in the patch notes. One place the AI is just plain horrible IMO is when using Arcade Mode. There are still a number of problems there.
1. The AI in Arcade Mode is still COMPLETELY oblivious to where you are. They are constantly bashing into you as you go for "CLEAN" passes.
2. There is a major problem with the AI on the straights. Regardless of the PP number assigned to the AI vehicles., in some (or I should say many cases).., you end smoking them on corners.., but when you hit the straights they have a VERY VERY UNREALISTIC rate of acceleration and manage to catch up to you and blow your a$$ away.
3. I'll give an excellent example of what happened to me tonight with the AI in Arcade Mode. In a race I used the Nissan March with VERY few upgrades to the car. With the few upgrades the PP wasn't that far up in the 300's. I found that almost EVERY single AI vehicle on the straights flew right past me. There was literally no competition there at all as the AI cars were WAY too fast on the straights. No amount of tuning helped.., even dropping the down-force to near zero to increase top speed didn't do jack.
I then go to check the PP number of the lead car. It was a Mini with a PP of 395 (which was CONSIDERABLY higher than my vehicles PP rating). So I figured what the hell.., just add a few more upgrades to get closer to that 395 (but keep it a little lower to keep the race more challenging) With the few newly added upgrades I brought the PP up to the 370s'.
I figured well this should work right..., WRONG! With the PP within the low 370's going back into that race SHOULD have just brought up the same AI vehicles from the previous race since I only jumped up a few PP points to be more competitive with the selected AI. Instead.., the system replaced ALL of the AI vehicles with much stronger PP ranges.., and once again.., I was getting blown away on the straights when all I was trying to do was simply MATCH the PP range.
The whole AI system is just freakin f'ed up IMO. With over 1000 vehicles to choose from.., you'd think they would have a much easier system for properly matching the AI to your selected vehicle.