Bhai Jaan,
Some mutations are compatible with life and others are not. Nonsense mutations will be taken care of by the checking mechanisms but they do occur. Some are significant and others are not. Some mutations are so insignificant that they will escape the checking mechanisms and will be passed to the next generation during breeding and they do occur. Mutations can be so insignificant that you won't 'see' them phenotypically. Over the years many such mutations occur randomly which are responsible for evolution.
Sticking to the point, offsprings of show quality dogs will not necessarily be show quality as you have put it. If you took a pure-bred male German Shepherd from Army Dog Center and bred it with a good quality pure-bred German Shepherd female from the same center, you have the chance of getting a show quality pup because we are breeding from the 100% West German bloodline which is the benchmark of show quality. Army Dog Centre dogs are from 100% West German bloodline.
You are calling Army Dog Centre as substandard but I don't know what standard you are talking about. Some dogs I do remember from the past. Arnold, Dragon, Apollo are to name the few who have fathered pups of my bitches. They were great dogs and because of that I had beautiful pups which could have qualified to go in a dog show. I never had time to take them there but they were beautiful.
If you take the working lines of Army Dog Centre and breed them, you will get show quality out of them if you select the dogs by their looks.
Point I would like you to understand: Army Dog Centre dogs are from 100% West German bloodline and if you breed this bloodline, you will get show quality pups. I have done it myself and had beautiful pups through the stud service of Army Dog Centre.