You can prove this by pouring some water on a leather seat - the water doesn't soak into the leather and you can easily wipe it off. Real leather would soak that liquid right up.

This is completely wrong. Properly conditioned and oily, pliable leather will still have waterproof properties, as well as cheap painted leathers. If you don't believe me, buy some quality $400 leather shoes, shine and condition them, then pour water on them. It will bead off. That's the point of buffed and dyed leather.

The conditioner stays on top of the seat or whatever leather piece you put it on and it doesn't soak in and actually condition the leather.

No experience with CG's product but this is also not true of conditioner generally. Leather is porous and will absorb oils unless you're dealing with cheap bonded leather that has a plastic coating, meaning the actual leather isn't exposed and touching conditioner.

Furthermore, conditioned leather is healthy. If you want your leather to stay dry and eventually crack, by all means don't use conditioner (though body and textile oils will still introduce dirt and oils to your seat).