few simple answers imho:
[1] road tyres for a road circuit.
[2] race on if visibility is ok all round.
[3] if the prima donnas don't want to race in the rain. let the boys with the bigger gonads entertain us - and make a few extra quid - something the lower order racers need.
[4] no race, then they refund their start money.

not the tt, but at the ugp a couple of years ago a well known tt winner went out in all his races and miraculously developed an electrical problem in all 4 of his bikes - what are the odds against that occurring? it just happened to be on/off rain. i pay a lot of money to watch these guys [and girls] race, i don't pay to see them pull in after one lap with 'electrical problems'.
i'm not advocating racing in clearly dangerous conditions like standing water, fog, oily roads etc, but since the start of racing men and women have raced in the rain. i love the good weather as much as the rest, but these are supposed to be ROAD RACES, it rains on the odd occasion on the roads.
what next? a purpose built indoor road race track? this is the uk, not daytona - or should that be gb, not daytona? never could remember.
ade!