I've been playing with oil immersion for a couple years, and its definitely not cheap. I bought all my oil from a local feed store. They stock the stuff as a horse (and other livestock) laxative. The cheapest I've found it was $20/gallon. Plus you will need pumps, radiators, heat exchangers, and fans. Also, as pointed out by someone else, Oil makes a huge mess. My hardware is basically inaccessible unless i have a full afternoon to play around with it. Finally, plunging your equipment into mineral oil is a pretty good way to void the warranty, so if it breaks its your problem.
My gaming rig right now has a pump and a heat exchanger, connected to chilled water with a water chiller in the garage. I can keep everything under 60C even while mining. My mining rig is in a separate tank with just a pump and a radiator+fan.
Distilled water doesn't conduct electricity. However, distilled water will not stay distilled for very long, especially if you dunk stuff with metal pieces into it. I saw a forum post once where someone tried it with an old computer to see what happened. If I'm remembering correctly it only took a few minutes before the computer shorted out.
I keep the cooling for each tank separate. If they were connected it would be somewhat easy for the pumps to be slightly unbalanced and overfill one tank while emptying another. You could install float switches and additional pumps to keep this from happening, but that would increase the cost and complexity.
The reason I do it? I can keep my cards 50-55C while mining, lower for gaming. It is almost completely silent in my living room. This kind of thing isn't really practical for mining rigs, unless you already have the equipment and oil, and you enjoy playing with it. Oil immersion is a hobby.