Why does engine braking work better in the wet?

[The_Dark_Side]

You are confusing friction with resistance.

And you're confusing resistance with drag. I said "friction" because I assumed that rather than turn into a pedanto-fest, everyone would know what I meant.
Tyre on road=engine braking at normal level for that vehicle/road surface/road incline etc etc.
Water inbetween tyre and road=extra drag induced by some of the energy that's pushing the car forward being syphoned off to push the water out of the way and/or through it.

 

[G-Dubs]

so when you go through a massive puddle on the motorway, the car slows down dramatically... is that becuase there is no frictions?

If you want to prove to yourself that standing water adds rolling resistance to the tyres think about which way your car lurches when you hit a deep puddle on the near side. This is just a massivly amplified example of what the OP is experienceing, and credit to him for being in tune with his car and noticing such on a wet hill.