I guess you have to bear in mind that there's 10 litres of the stuff in the cooling system, that the risk of spillage is relatively high in the event of a collision and that water actually has a pretty reasonable specific heat capacity http://www.engineeringtoolbox.com/specific-heat-fluids-d_151.html and is non-toxic.
It's also cheap, abundant and, as said, it can be made inert with respect to corrosion relatively easily.
I believe WW2 aircraft engines used to use neat ethylene glycol to allow higher temperature use but that is toxic, of course, especially when used neat, and has much less heat capacity so you need more of it (or a higher flow rate, at least) to shift the same amount of heat.
Kevin
Thanks Kevin, now that you, Jimbob and TB seem to suggest that there is no alternative at the moment I'll have to accept that
As for glycol, yes the Spitfire for instance used pure ethylene glycol, but as the header tank was very exposed, at the front, on top, of the engine, to enemy fire and the Merlin III, used in the MkI Spitfire, would quickly seize up of course!!
Apparently the other problem was it was very inflamable and when hit by enemy bullets would often start an engine fire!
With the Merlin XII used for MkII Spitfire's Rolls Royce designed the system to take a mixture of ethylene glycol with water, and this reduced the risk of fire.