Got it figured out, found out from another forum. Apparently the HP series 600 plotters do not support raster images, and that is what wipeouts are. SO what you have to do is make the plotter your default system printer, and then reconfigure it in the preferences dialog. It's working for me...
When I use text mask in model space it works fine, and when I go to plot the drawing in paperspace, in print preview the text masks are shown as working. But when the drawing is plotted, the wipeouts don't work and a rectangle is drawn around the text with no wiping out of whatever is behind...