There isn't any coating that's as effective on wood as a waterproofing agent other than epoxy. In fact, the I can't think of any other product that is truly effective on wood. This is the reason wooden boats have seen such a revival in the last 3 decades. With the wholesale replacement of wooden boats by production 'glass boats in the early 60's and by the 70's all of the boat manufactures either died off or converted to 'glass. This was because of the maintenance issues associated with moisture and wood. Nothing was waterproof enough as a coating. A number of adhesives where, but no coatings. With the advent of the Gougeon brothers developments in the 70's, wood could be coated, effectively sealing out moisture.
By the mid 80's the testing was completed and long term assurance, could be had with epoxy as a coating. This caused a slow at first resurgence in wood boat building and repair. By the late 80's a boom was in full swing and it's only slowed for the few economic recessions we've seen since. So effective is the coating, new building methods, entirely dependent on epoxy have been developed.
If epoxy is handled with the appropriate precautions, no toxicity issues will present themselves, for the vast majority of people. Some people will, in spite of precautions, but this is true of most chemical combinations. When fully cured, epoxy is inert. It's so inert, they use it in medical implant devices to seal circuitry and other elements. The problem most run into is, a casual regard for liquid and not fully cured (less then a few weeks after cure) epoxy. The most common concerns are breathing freshly cured epoxy and skin absorption. I know several with allergic reactions to epoxy. When forced to make honest answers, they all without exception, admit to be a bit casual around it for a long time. If you swim in a chemical soup, you can bet you'll develop an issue, just ask any production boat laminator about styrene. I've used epoxy since the 70's, but much more so since the 80's and though I'm now slightly reactive around certain formulations, I have no reaction around others. I'm lucky, because I was casual initially with the stuff, which is what likely caused my initial reactions to appear. Since figuring out it was the hardener type, that was affecting me and switching to different formulations, no issues.
WeldWood isn't a coating.
If you insure you don't breath freshly cured epoxy dust and don't smear liquid epoxy on your skin, your chances of a reaction a very slim. Again, some can have a reaction and there's no way of telling beforehand, though most of these folks have other allergic reactions to things, so a clue can be taken from this.
Testing has shown that thinning epoxy (or anything else for that matter) does improve surface penetration, but dramatically decreases it's abilities to waterproof something (a diluted goo isn't as good as a full strength one). Simply put, a waterproof coating is dependent on the quality and thickness of the coating, not how far it has penetrated a substrate.
So, in a nut shell, you can use other adhesives, but in the big picture, the quantity of adhesive, compared to a coating product will be hugely tipped toward the coating side. I used to do this, using several different glues, but now mostly it's just epoxy, to keep supplies simple and retain common techniques and tools used, not to mention I can be a wood butcher with epoxy, but not with the other adhesives. I once intentionally made a 5 sided box, by breaking the 1/4" plywood into the panel shapes over the edge of a work bench. Yeah, the "cut lines" where as rough and ugly as you'd expect, but I duct taped the box together and put a fillet on the internal corners. I then removed the tape, after the goo setup and smeared thickened epoxy on the outside corners. When it was fully cured, I hit it with a DA, touched up some divots and it was just as ready for fairing compound, as if I had used a fine toothed saw to cut the panels. It was no weaker and I still have this box, which I store about 3 dozen spring clamps in. I've yet to find anything that can come close to all the benefits that epoxy can bring to the table. Some adhesives can be stronger and make tighter glue lines, but can't be used as a coating or to bond a fastener into a hole.
I guess what I'm saying is don't be afraid, just cautious and protected.
I'm not familiar with hotmelt pu - can you tell me more? Do you regard it as better/stringer than ie loctite PL premium - worth the extra trouble? 
