Yes, travel mode only stops TC from dropping when friendly ships come into the vicinity (plus shallow water & land proximity). TC will still drop out when enemy ships come nearby.
However, usually the watch crew don't report them, and without a mod you can't see the smoke on the horizon even if you look around for a ship, so typically you would re-enable the TC and end up meeting that DD you couldn't see in the distance. By the time you realise it you've been blown up.
As mookie says above, the TC drop-out does still work correctly - you just have to know to proceed with caution if it happens, as it's a sign of an enemy nearby. Visiting the hydrophone station is probably the best thing to do if it happens, and find out which direction they're in.