Logisim's propagation algorithm is more than sophisticated enough for almost all educational purposes; but it is not sophisticated enough for industrial circuit design. In order from most damning to least damning, the shortcomings of Logisim's propagation technique include:
Except for the issue of gate delays, Logisim does not particularly concern itself with timing issues. It is very idealized, so that a pair of NOR gates in an S-R latch configuration will toggle in lockstep infinitely, rather than the circuit eventually settle into a stable state.
Logisim cannot simulate subcircuits whose pins sometimes behave as inputs and sometimes behave as outputs. Components built using Java can have such pins, though: Within the built-in libraries, the Memory library's RAM circuit contains a D pin that can act both as an input and as an output.
Logisim cuts off its simulation after a fixed number of iterations assuming that there is an oscillation error. Conceivably, a large circuit that does not oscillate could lead to trouble.
Logisim does nothing with respect to discriminating between voltage levels: A bit can be only on, off, unspecified, or error.
There are additional shortcomings, too, that I have omitted because they are so obscure that if you were aware of them, it would be obvious that Logisim comes nowhere close to that level. As an extreme example, I have a friend who works for a major chip manufacturer, and his job is to worry about "bubbles" in chips' nanometer-wide wires growing and leading to random disconnection.
Even beyond this, I am not a circuit design specialist; thus, there may well be errors in the propagation technique of which I am not aware. I welcome corrections from experts.
Next: User's Guide.