The Beetle used appropriate technology to fulfil its design brief, which was also good enough to considerably exceed its design brief, in ways that it's designers probably didn't fully imagine at the time.
Example: oil/air cooled engine has nothing to freeze, an important consideration in Northern Europe. It can also be very light, as you can make it from magnesium and aluminium alloys, which require very careful care and feeding if in contact with liquid coolants. It can also be made self contained. No coolant hoses to disconnect or radiators to get in the way during an engine change. As the Beetle architecture was always going to become the basis of military vehicles this is particularly significant, as mechanical work may be required to be done under "difficult" conditions. Oh, and there is the not insignificant consideration that, in 1930s Europe, economical motorised transport had, for many, meant a motorcycle. Many of those who might be expected to be driving or working on Beetles would be very familiar with the nature of the Beetle engine, which bears far more resemblance to a motorcycle engine of its time than to any conventional car engine.
Yes, all things being equal it will be noisier than something with a water jacket and a more constant operating temperature, but refinement wasn't much of a consideration for a people's car in the 1930s.
Yes, if you try to get more power out of it than designed you can run into heat management problems which, in a water cooled design can usually be solved by pumping more coolant and increasing rad size. On an aircooler things like fin area become important if you're going to demand sustained high power outputs, and it's notable that, say, a Porsche 356 cylinder head carries far more fin area than that of a Beetle. However, the Beetle had enough cooling to do what it was intended to do.