Engineered wood will be more practical than "real" wood, if using real wood make sure it's kiln dried or even reclaimed as it will be far less likely to move/warp with temp/humidity fluctuations.
Yes, wood is a good insulator and therefore would not be as efficient over UFH than say, ceramic tiles. The thicker you go with the wood the less efficient the system will be, maybe causing you to run the system at a higher temp, which would be more costly and also increase the risk of warping. Also, if you're adding a layer of sound insulation under the wood you'll also be increasing the TOG value of the floor, again increasing the workload of the UFH.
As SRW says, UFH acts more like a storage heater than a radiator, and isn't good for quickly heating a room.