Ha ha. No, they didn't. Some drafting was penalised but smaller events just haven't got enough referees to watch everyone.
There probably should be two events: triathlon racing and triathlon time trial; but who would watch the duller TriTT?
You say that (BIB), but has anyone ever tried it? I think it would be absolutely fascinating and we'd get a true picture of the competitors' relative strengths.
I enjoy seeing triathlon on television. The spectacle it currently produces is certainly good to watch, but all pretence of an even balance between the three elements was abandoned long ago.
One point I've often seen made is that drafting is quite significant in the swimming phase as well, so trying to eradicate it from the cycling arguably replaces one inequality with another. The situation seems to be crying out for an ITT variant, but I can only think the governing body fears that their "shop window" event would be undermined.