Gas Water heater leaking water from flue vent! Help!!?

Yes basically your heater is toast. When ever it starts leaking anywhere on the jacket like that, it's gone. However, before you replace the heater, or really after also, PLEASE check the water pressure coming into the house. When a water heater usually "dies" it leaks from the bottom, when it leaks from the top it is usually because the pressure in the tank is getting high. Normally your T&P valve will trip and relieve the pressure through that line, but if it is an old heater, it could be stuck closed and that could be very dangerous because the pressure has nowhere to go. So have your water pressure checked also, it could have been the nail in the coffin for your heater. Good luck and feel free to EMail me if you need more info.

I believe its a condinsation problem, try running a dehumidifier in the utility room and make sure you have your vent going up and where it turns to go out it should go back down like 1/2" fall in 10' just ever so slight. Turning the water off wont immediatly releive pressure from the tank so I think that was a coincidense.