Where are you reading that water "has no insulating properties whatsoever?" Water can absorb and retain heat and I can't find anything to the contrary online.
technically we cannot say that "warm water" has no insulating properties whatsoever". but you are missing the point.
air is a better insulator. and obviously in this case, we are using neoprene as the insulator which works well.
if the suit lets in water, your body has to provide the heat energy to warm that water. that decreases your own bodies heat and energy stores. pretty simple.
then as that water cools, and more surrounding water creeps in and out, you have to use even more body heat and energy to reheat the new water. not very efficient right?
this is why many people (including me in the past) have been diving on a site where someone will pour very warm water into your suit to start the dive.
what does this do? it obviously provides a temporary heat source and means you are not expending your own body heat and energy to heat that already warm water.
but it does not change the fact that surrounding cold water can still enter the suit and flush out the warm. so now you have to use your own body heat and energy to reheat that new water. is it more efficient adding warm water to start the dive? of course it is.
but none of this is as efficient as having zero water in your suit. period. thats why they invented the drysuit.
the simple question is......which is warmer.....a very wet wet suit, or a drier wet suit? and if anyone thinks a wet wetsuit is warmer they need to give their head a shake. the drier the better.
or
which is warmer.....a 7mm west suit, or a 7mm dry suit? they are both made using the same insulator right? but obviously the 7mm dry suit would be more efficient at keeping someone warm.
both can work well depending on the circumstances but there simply is no valid argument that can change the fact that being dry beats being wet.