You can see a picture of an 8x50R cartridge loaded in 1918 here:
http://www.gunauction.com/search/displayitem.cfm?itemnum=8953258
You can see from the condition of the bullet that if unprotected it would rust. Rust could be a big problem as it would effectively increase the diameter of the bullet and could lead to both chambering problems and barrel damage, if not excessive breech pressures.
You can see a VERY badly rusted (battle field reclic, I suspect) here in post 14:
http://1914-1918.invisionzone.com/forums/index.php?showtopic=161907
This page, about half way down, gives some information on the various 8x50R cartridges:
http://milpas.cc/rifles/ZFiles/WWI/Machine Guns/Schwarzlose Gun/Schwarzlose Gun.html
The Schwarzlose used the same ammunition as the rifle until about 1915 when it was modified to allow for better feeding in machine guns.
As for the bullet itself, yes, it was a mild steel jacket with a lead core. It was NOT an all-steel bullet. That would be impractical as all get out. It would be far too light and would have pretty bad ballistics (like steel shotshell shot) and it wouldn't have the flexibility needed to compress into the rifling.
The ONLY non-lead monolithic bullet I know of in use by any military at this time that I know of was the famous French Balle D, which was solid lathe turned bronze.
Mild steel jacketed bullets were commonly used in Europe. Nazi Germany loaded them, apparently as a substitute standard, through World War II, and was used in Com-Bloc nations throughout the Cold War.
Mild steel is a lot cheaper than gilding metal or other jacket materials.
Another user of steel jacketed ammo were the British, but for cartridges destined for use on dangerous game. As originally loaded by Rigby, the .416 cartridge used a steel-jacketed bullet up through World War I, and possibly later.
Gilding metal was still in its infancy and early attempts to use it on solids for dangerous game by various manufacturers had been problematic. Bullets would rivet (fold) or even break apart.
The steel-jacketed bullets were FAR more resistant to that.
Regarding the newpaper article, I'm positive that it's talking about sport shooters, NOT soldiers. Yes, sport shooters tended to dip their bullets in some sort of lubricant prior to firing with cupronickel jacketed bullets, but again, this was not a generally convention in military usage.
As for the asphaltum sealant, it's most definitely a moisture seal designed to give the cartridges the longest possible storage life.
Once again, I'm not 100% certain, but I THINK that the United States only moved to asphaltum moisture sealants after the cupro-nickel jacked bullet was dropped from service in the 1920s.
When the cupronickel jacketed bullets were dropped, bullet to case bonding (especially bad with the tinned cases that used to be loaded) ceased to be an issue.
The government either developed or specified the use of asphaltum moisture sealant in military cartridges from that time forward. The asphaltum had the advantage that, under gas pressure, it didn't hold the bullet so tightly that it caused higher than normal chamber pressures.