Your entitled to your opinion and I respect that. But I would like to address several things you say:
1. "TEC and block CANNOT keep up with a good water cooling loop."
I already addressed this. Any water cooling system cannot cool below ambient.
Technically speaking any Thermoelectric Cooler device will always cool more efficient than a water cooling setup. (For proof see # 6.)
2. "Tec cooler has a high failure rate."
This is just nonsense unless you can back this up with more than several complaints from people in this or another forum. I am in industrial sales and actually have a bit of experience with Thermoelectric Coolers. There is absolutely no way they would have a high failure rate. The ones used by CoolIT are industrially designed and are similar to ones that work well in the oil and gas industry cooling thermal regulation devices. They do not fail as a rule.
3. "Actually, if you look around you can find a nice custom water cooling loop for just over $200 new."
In my opinion not a decent one worth purchasing, and certainly not one as good as a CoolIT product.
4. "And the fan on low is just fine, but when you turn it up it is louder than any gpu fan I've ever heard."
Your right, on high the fan is a little loud, but why would you turn it up that far?? Many reviews have been done on the internet by reputable sites including Tom's hardware. He states that the temperature obtained from the Coolit device is acceptable even with the fan on medium.
5. "You may want to ask yourself why you find several enthusiast sites full of people with water cooling, and only the occasional Freezone owner."
I did ask myself that question, and it's answer is simple. You said it yourself when you stated your sentence. "Several enthusiast sites full of people with water cooling"
TEC coolers that are self contained are only now reaching the cooling prowess to beat the best of the water coolers. This technology as used to cool CPU cores is still in it's infancy. Wait three years and most likely you will see many many more people using Thermoelectric Coolers in computing. It certainly makes sense from a physics standpoint. And from a user experience it is far more elegant.
6. This refers to my statement that Thermoelectric Coolers work well and that the CoolIT Freezone Elite is a viable product. As I said earlier there are your opinions and my opinions. But what really counts are the reviews. There are about ten reviews of the Elite and other CoolIT Thermoelectric Coolers on the web, three of the reviews fair, the other seven are giving the unit very high scores. Even water cooling reviews are as good or worse than that. So in conclusion I am simply going to let the following several reviews state my case for me:
http://www.tomshardware.com/reviews/radical-cpu-coolers-coolit,1634.html
http://techgage.com/article/coolit_freezone_elite_cpu_cooler/1
http://www.nordichardware.com/Reviews/?page=8&skrivelse=520