Fire fighters' lives have been lost because fires thought to be isolated to one part of a building have unexpectedly emerged somwhere else, or because roof or floor structure has been weakend to a greater than obvious extent, because fire has traveled unseen within concealed building spaces. The reason for fire blocking is not to stop a fire, but to hamper its progress and not allow it to spread rapidly within interconnected conceald spaces.
I have never understood the reasoning for fire caulk to be used to seal a hole in combustable materials
Fire blocking is more important in combustible construction than in non-combustible. That is because it is the combustible construction that allows a fire to grow and spread within the concealed spaces. Just how much will the holes drilled in plates or other fire blocks facilitate the spread of fire? Well, that depends on ths size of the hole. But remember, in a fire the jacket and insulation on the NM cable for instance will burn off rather quickly, so only the copper wires will be there to fill up the holes. The advantage of the right fire caulk is that it will expand to fill in the hole.
...we could always dig through the ashes, pick up a little red ball of putty and say "Thank God we had these!"
Well, the intent of the fire caulk wasn't to keep the house from burning down. Did the fire caulk slow the spread of fire so that someone got out that wouldn't have otherwise? Maybe we'll never know....