Seriously, do they normally machine steel dry,
Yes. IIRC one of the reasons being that the inserts need to be kept at a fairly constant temperature, so coolant needs to be a very strong flood. This is not always possible & is difficult to both guard & collect. Intermittent application of coolant to hot inserts can lead to failure due to thermal shock. Again IIRC, the idea is that most of the heat goes into the swarf, but I have regularly come across operators keeping a pair of welding gloves to hand to change tools, as the tool bodies can get hot enough to burn you. Insert drills, though, need high pressure through-tool coolant to blow the chips out of the hole – that really does go everywhere !.
the Mandelli factory in Piacenza in the late 1980s, they were capable of such work rates that it was refrigerated before re-use.
That may have been to keep the workpiece cool to maintain tolerances. I have seen some machines that use temperature controlled coolant circulated through the machine to keep the machine structure cool for that reason – including through hollow ballscrews via rotating unions. As Mandelli were manufacturers of quality boring machines, I would expect that they took dimensional accuracy of parts seriously.
Nigel B