Do axonal conduction delays have a function?
Your point #1 is correct, signal propagation is not instantaneous in real physical world. But for some models it is "good enough" to approximate action potential to go through axon in an instance.

There is also biological role of signal propagation timing. One example, is classic Hebbian learning model. Based on "fire together - wire together" idea, connected neurons that become active relatively close in time, will increase synaptic connectivity, illustrated here: