No idea who dreamed up that urban myth.
Factory cars all have power brakes using a vacuum booster. They also all use DOT 5 because the federal government says so.
Silicone was developed to resist absorbing moisture which causes the aluminum piston to seize to the cast iron bore of the brake caliper (which is why almost all Corvettes now have stainless steel sleeves in their original Girling four piston fixed bridge calipers).
The difference between DOT 3 and DOT 5 isn't silicone but the boiling point of the fluid. Bigger brakes (you have 11 inch discs, Camaros have 12 inch discs and the newest Corvette has brakes that are bigger than 14 inches. These disc sizes grow because the cars are getting faster than ever (the new Camaro weighs as much as a BBC first gen Camaro but has nearly twice the horsepower out of a SBC, for a top speed of just under 180 mph). That amount of speed requires a bigger brake to stop it so bigger and bigger rotors. That energy (heat from friction) gets into the brake fluid. Brake fluid only works when it is an incompressible fluid, not as brake fluid vapor after being boiled. Because of this the boiling point keeps going up (since the Corvette can now top out at 204 mph I expect the brakes to get bigger again and the boiling point to rise).
As to the points you raised. If your seals fail and brake fluid is ingested into the motor you won't be driving much because you have no brakes. All seals are DOT 5 compliant. You don't want water in your brake fluid because it's boiling point is far to low, that is why they went to silicone to get rid of the water that the glycol absorbs from the atmosphere. DOT 5 brake fluid in a sealed brake fluid container won't cause fish eyes in your furniture painting projects which takes away from your car building time.
Ignore idiots that post this (as in who paints furniture when there are cars to build.