Not to mention that most watercooling loops use rubber o-rings which might degrade over time, depending on what specific oil type is used, although this would be one of my lesser concerns.
As it was mentioned, water has a higher specific heat than mineral oil which makes it a better carrier of thermal loads than mineral oil, so it mineral oil would actually detract from the cooling capability in the loop rather than being a water-based solution, or even pure distilled water.