Disagree with your final statement. There's good security (and performance) reason to use any/all viable network isolation/segmentation/separation, etc., whenever/wherever possible. So-called Wi-Fi 'client isolation' is but a single network security strategy. No single strategy should be relied upon exclusively, nor avoided for that matter.
But it seems we otherwise agree on the overall impact of this vector. My point was mostly about the statement regarding any 'bypassing' of encryption.