This is true, Water Putty would probably not be good for an outdoor application, since it doesn't flex like the wood does.
It's great for other stuff, though, like furniture repair. You can even make replacement moldings with it if one is missing off a piece of furniture that is to be painted. Just press a putty sort of RTV around any other mirrors of the missing one on the piece, create a mold, pour in the Water Putty, bang mold on a surface to get rid of bubbles, let it harden, remove, trim, and sand.