most definitely works. rub it on thick - petroleum-products and water will not easily mix so as long as the layer of vaseline remains, there's a barrier preventing the sub-40 water from contacting your skin directly.
I've found it helps with wind as well, just by way of protecting the skin a bit, but that may be more psychosomatic than anything. For water, it certainly is a big help.
As for under the wetsuit, I've been doing that in critical chafing areas (armpits, neck, nipples) during long sessions in my older suits for a long time and have not noticed any adverse effects on the integrity of my suits.
Funny related story - in college my rugby team had a really talented guy from Nigeria. Problem was he pretty much turned blue and got useless under 50 degrees. We once covered his arms and legs in vaseline to try to keep him warmer. not sure it worked but made him really hard to tackle!
had success versus frostbite with using vaseline when ice climbing in below zero weather