There's absolutely no correlation between temperature induced boiling like in 2-phase immersion cooling (no moving mechanical parts) and cavitation (caused predominantly by mechanical moving parts).
Temperature induced boiling like used in the 2-phase immersion cooling is excess energy which changes liquid to vapor. The vapor forms bubbles which have a lot of stored heat energy and higher pressure than the surrounding liquid. Therefore bubbles will rise up and some even grow when merging, but they will NOT just collapse on their own. Or otherwise we would see the same damages of cavitation on all cooking pots, pans, etc. as well and those will not show any effect even after decades of boiling water.
The damaging cavitation you are referring to are caused by low pressure, e.g. pumps, turbines etc. creating a very fast flow of liquids (e.g. venturi effect). Like it is possible to boil water on Mount Everest with very low air pressure at much lower temperatures, the actual energy put into those bubbles is only very little. But as soon as the surrounding liquid pressure takes over with turbulences etc. over the temporary low pressure, then the cavitation occurs. The energy in the bubbles is too little to sustain their state and caused only by temporary low pressure, unlike temperature induced boiling where bubbles have a lot energy insider to carry vapor to the surface. That's why you will always see cavitation damage in connection with pumps, turbines, valves, etc., but NOT temperature induced boiling.
Here's a good article describing it:
http://www.pump-zone.com/topics/pumps/centrifugal-pumps/when-bubbles-dont-burst-why-cavitation-damagingjimmothy took exactly the right text part out of the Wiki article on cavitation. Since the DIFFERENCE is being described between boiling and cavitation, they are NOT the same as the bubbles are created differently (temperature vs. low pressure). Cavitation does not occur with temperature induced boiling. On the other hand, oil cooling uses pumps to circulate oil to and from the heat exchanger, so yes - there might be cavitation around the pump impellers just as mentioned on Wiki and all the other links where pumps or anything with an impeller / propeller causing fast moving liquid pressure differentials.
On toxicity and evaporation and all other arguments on that it's not practical - one of the many articles on the web:
http://www.pcworld.idg.com.au/article/542462/intel_sgi_test_full-immersion_cooling_servers/Does it mean that Intel, SGI, U.S. Naval Research Laboratory, Lawrence Berkeley National Laboratory, Schneider Electric, etc. are all wrong, suicidal and have no idea what they're doing? Interesting... maybe you could make much more money by teaching all their PhD's, etc. a lesson in physics and chemistry and prove they're all wrong...
Guys, if you want to use scientific arguments, then please apply those correctly and not make any unfounded statements where correlation is not proven. At high school we've learned how racists tried to use pseudo-scientific arguments to claim that black people are less intelligent, because they allegedly have their hair roots outside of their head and their hair is growing inwards into the head, leaving less space for the brain... Everyone can make (false) claims, but please provide scientifically backed sources / experiments / case studies with sufficient large sample sizes to prove your point.