It does not matter how much cool air you jam into the case, if you don't exhaust it out, heat builds up. I would move one of those 120mm fans to the back to increase pulling heated air out and see how your temps do (which I agree, are not bad - but I would like those highs to come down a bit too).
Did you apply as thin a layer of TIM (thermal interface material) as possible? It is important to note the best transfer of heat occurs with direct metal to metal contact. The purpose of TIM is to only fill the microscopic pits and valleys in the mating surfaces to push any trapped insulating air out. Any excess TIM is actually in the way and counterproductive to heat transfer efficiency. Also, depending on the TIM formulation, some TIMs require a curing period where over a few days of heat-up/cool-down cycles, temps can come down by as much as 4 - 5°.
You also stated some concern over how fast the temps go from cool to peak highs. I'm not surprised. It only takes a few clock cycles for CPU temps to go from cool to over heated. And since that i7-7700k cruises long at 4.2 billion cycles per second, a lot can happen in 1 second. And because fans are mechanical devices, it takes time for even the best fans to compensate - which they don't begin to do until the BIOS senses, then directs the fan speed to ramp up. So rapid temperature increases can be expected - but temperature drops should be nearly as quick as well.
I agree that AiO coolers are much better than they used to be, but anything with hoses can develop leaks, either at the fittings or even the hoses can be punctured, flawed, or over time become brittle and crack.
I personally don't like water cooling solutions - though my position is probably biased based on past history and experience with clients, and not any recent problems.
1. Too often after new builds with alternative cooling, users are extremely diligent at performing regular inspections to make sure there are no leaks and everything is working fine. The problem is, after a year or two of no problems found, those regular inspections fall by the wayside right when components start to age and inspections should increase! We saw many older systems that developed leaks, some causing severe (and scary) damage, some where the coolant just evaporated, and even a couple where really nasty mold took over. 
2. Designers intentionally cluster heat sensitive and heat generating devices around the processor socket where they can take advantage of the air turbulence provided by the processor fan. If the user does not properly address case cooling to provide an adequate flow of cool air through the case, those devices may not receive sufficient cooling. This can result in instability or increased aging. Back in the day when electrolytic caps were commonly used, this may have resulted in leaky or bulging capacitors at a higher rate than those boards using conventional/OEM cooling.
