What limitations are there to sauteeing with water?
The big difference is that oil can get to a higher temperature than water can.  Water turns to steam at 212F, while most oils won't start smoking until 300-400F.  Caramelization doesn't happen until 320F (for sucrose and glucose, 230F for fructose), while browning (the Maillard reaction, to be specific) doesn't happen until 375F.   Now when you "saute" like that in water, you'll also be using the steam to cook, and the steam will be somewhat hotter than 212F, but probably not enough hotter (or in enough quantity) to get to those reaction temperatures.   You might get high enough temperatures via direct contact with the bottom of the pan, but that's a recipe for uneven cooking, as the part of the food actually in direct contact are likely to be quite small.