Yes, treating thread wrappings with beeswax does reduce the amount of moisture they can absorb. And moisture absorption is a big problem for some thread materials, specifically cotton, and some flute woods, like boxwood or fruit woods.
The problem with dry wrapping using cotton thread is that it absorbs the moisture that comes from the bore when you play, and it expands when it gets wet. This can cause tenons to stick, and worse, it can accelerate problems of tenon compression. The effects of this have been studied in detail, and were first documented in the following paper by Claire Soubeyran (if you want to get into the details):
Terry McGee has also done some detailed studies on these effects.
Some people go so far as to suggest that you shouldn’t thread wrap tenons at all, and instead you should use cork. Personally, I read the results of these studies a bit differently.
If you look into the detailed results of the Soubeyran study, for example, you see that dry cotton thread has the worst results, in terms of tenon compression. Waxed cotton is only slightly better, silk is better still. Waxed silk wrapping has the exact same level of compression as cork wrapping, and even they are not perfect.
So, my take is that you really shouldn’t use cotton thread (because it absorbs a lot of moisture and swells up a lot). And even when using a less absorbent material you really should soak it in wax to reduce the amount of moisture it can absorb further.
Personally, I still thread wrap my tenons, because I prefer it to corking, for various reasons. I use silk thread which I soak thoroughly in beeswax. I also make most of my flutes from stabilized wood which doesn’t absorb moisture and hence doesn’t have the expansion and contraction cycle that leads to tenon compression.
By the way, this issue is discussed in more detail in this older thread.