Oh yes they do circulate hot water! NASCAR and NHRA Pro Stock builders do for sure and I would guess (not sure) that all the big name F-1, CART and other top teams do so as well.
One though could get similar results by bolting a cylinder head to the other side of the torque-plated side for machining/honing. The water trick is neat but much more involved. Btw, I do know the the Pro Stock guys also use a torque plate on cylinder heads to mimic distortion as a Serdi cuts bowls and finishes the valve seats. Makes a lot of head work a real bitch too.
"Although I realize that the lack of bolting an intake manifold, engine mounts , water pump, bellhousing etc is not possible. Do any engine builders here go to the extreme of having running temp hot water through the block while machining?"