There is suppose to be hot water in the water heater, right?

A local contractor installed a new furnace and water heater for me on 1/21/2013. The install appeared to go well. The furnace is keeping our house warm and the water heater runs without making crazy noise and it is producing hot water. All is perfect in the world, well not quite… While checking out the water heater (AO Smith GDHE-50) I noticed that the lower side connect was quite cold, the brass drain was very cold too.
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Fool me once, shame on you, fool me twice …

American water heater company, the maker of the water heater I installed issued me a return authorization number for the water heater that would not run when installed per the instructions. I installed the new one (1/5/2013) and this one works better (it will start), but still not great. It makes noise when starting and the flame is quite yellow and has bad shape. I have posted videos of the start and flame for technical support to look at.
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I didn't do anything wrong

Ben, a plumber from K&S came by and spent 3 hours going over my install and inspecting the water heater. He found nothing wrong with my install, whew! After talking to technical support we got the unit running by removing the intake and restricting the exhaust. We had hot water, but the install wasn’t going to pass code as it deviated from the installation instructions. Water heaters go virtually unnoticed, that is until they don’t work!
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We need some air in here!

In a previous posting I mentioned running into an issue with our water heater failing to draft when all the exhaust fans and clothes dryer running. I did some research and through testing I thought the entire issue could be resolved by adding more “make-up air”. Thus I added a 6″ duct into our mechanical room. This was in addition to our existing 5″. You would think that after having ~48″ sq.
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