The prohibition is not overruled by the reason for it. The prohibition is to not even look at alcohol, because if you do, you will be deceived by it. The passage is clear that looking at alcohol (just looking at it) will (not might, not could, but WILL) make you look upon women whom you ought not. The passage plainly states this.
Proverbs 23:31-35
"Look not thou upon the wine when it is red, when it giveth his colour in the cup, when it moveth itself aright. At the last it biteth like a serpent, and stingeth like an adder. Thine eyes SHALL behold strange women, and thine heart SHALL utter perverse things. Yea, thou shalt be as he that lieth down in the midst of the sea, or as he that lieth upon the top of a mast. They have stricken me, shalt thou say, and I was not sick; they have beaten me, and I felt it not: when shall I awake? I will seek it yet again."
This is echoed by Paul when he says that evil communications CORRUPT good manners (1 Corinthians 15:33). What we look at affects us, and thus the Lord commands not to even set your eyes upon sin (Psalm 101:3, Ephesians 5:11), such as alcohol.
The problem is Scripture does not prohibit alcohol.
Yes, we do not set our eyes on alcohol, or on the flesh for that matter.
But several passages tell us that wine, while warned of overindulgence and drunkedness, was not prohibited.
You may believe that deacons are not to be given to much non-alcoholic grape juice, that somehow grape juice put in old grape juice skins would magically cause the old ones to burst, etc. And that is fine.
The problem, however, is this also means that you are unable to grasp many symbols used in the Bible and cannot understand several sayings. By molding Scripture to your preferences you prevent yourself from understanding parts of Scripture.
In Scripture wine is associated with blessing. It is associated with joy. It is used as a symbol for the Spirit. This is due to the effect of wine (not to the point of being drunk, but the effect of the alcohol in wine).
Wine was used as a medicine and as a component of medicine because of the alcohol. A little was (and is) good for the stomach.
But Scripture warns against drunkedness. It also warns against the temptation of overindulgence .
In the Bible wine was produced and once the fermentation started new wine was stored in wine skins to mature. The gasses produced expanded the skins. Old wine skins would be stiff. If you fermented new wine in old wineskins the wineskins would burst because of the fermentation process.
Several 1st century Jewish wineries have also been discovered. So we know from history and Scrioture that wine in the Bible contained alcohol.
And yes, it was common to dilute the wine with water.