What limitations are there to sauteeing with water? I was recently helping with some recipes and was instructed to use water for "sauteing" onions, celery, garlic, etc. in place of oil (scare quotes on "saute" since it involves frying in oil or other fat by definition). 

The technique is meant to parallel sauteing in oil, water is measured by the tablespoon in a large pan, and although you replace water as it evaporates the vegetables are never submerged in water. Only enough water is ever used to inhibit sticking of the vegetables to the pan.

The results were good and light but I haven't had much of a chance to push it further and experiment with the upsides and downsides (the three dishes meant to just soften the onions, garlic, celery and I had to follow the directions). Obviously, using oils imparts that flavors that you otherwise won't have present if using water. More importantly though, I would like to know which reactions would be inhibited in some way; for instance, would browning and caramelizing happen at a different rate, or at all? Are there any other preparations that would be impossible without a fat to saute in? What are the limitations when using water to saute?
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.