While outside my rig one day I noticed brown water dripping very slowly from the water heater compartment. When I looked inside the attached photos show what I saw. I had been running my water heater on electric but had switched over to propane a week before the pics to "exercise" the propane setup. I switched back to electric and eventually the flu dried out. I contacted my dealer who contacted Redwood and Suburban. I suspected a crack in the weld where the flue attaches to the tank. I was told that it wasn't a crack otherwise it would leak on electric (which it doesn't) I thought when the area was heated from propane it opened the craack but didn't get hot enough on electric to open the crack. What they said was that when you burn propane a by product is water which condenses in the flue. So they could do nothing about it. My questions I have are why are you not warned that using the heater on propane can cause this so you can keep an eye on it. As seen from the photo water was sitting in the bottom of the flue if this is a common problem why did they not engineer the flue to slope out or install a drain hole for condensation drainage? Meanwhile my water heater continues to rust away. 🙁

From the looks of those pics, your water heater looks 10-12 years old or you are/have spent a lot of time on the coast. My wh is 3 1/2 years old & has been used everyday of that time & looks new compared to yours. If you are on the coast or somewhere equally as humid it could be condensation, but it appears to be a lot, running on electric doesnt use the same flues, but could cause condensation in them & I'd think running on gas would dry it out after a few minutes.
Sorry not much help, but as corroded as it looks from the pics I'd have someone more knowledgeable than me look at it soon.

The answer about the flame causing water is certainly correct. A byproduct of the burning of any fossil fuel is water. You can check your tailpipe in older cars without catalytic converters ( and even with), when first started will have alot of water come out the tailpipe. C3H8 is propane C3H8+5O2 = 3CO2 + 4H2O so for every molecule of propane you burn you get 4 molecules of water and 3 molecules of carbon dioxide. Using electric doesn't burn any fossil fuel and therefore has no water byproduct.

I have a 2014 Redwood and live in it year round. The problem only occurred this winter. I was in florida from Nov. till end of Dec. then in Texas from Jan. till april. I usually just spend the winter in Texas. The weather in florida was warm and relatively dry while we were there and the weather in Texas was warm and dry while we were there about a 40 minute drive from the coast. Before I noticed the problem in early April everything was fine. I still think the flue should be slanted down to allow drainage or have a drain hole. Since I got the rig I have run the water heater on propane in the summer because that was cheaper than electric. In winter I have been using mostly electric. A new water heater is going to be expensive. B)

You guy's got me curious about mine so I drove down to the storage unit...

Here is what I have. It's look's like it's time for some periodic maintenance. Thanks for bringing it up:

Just another couple of comments:

You will get more condensation starting up the WH on propane from a cold start (cold water in the water heater) until the water warms up a bit to be above the dewpoint temperature of the combustion gases going through the heater. If you are just testing from a cold start you will get more condensation. your cold water temperature will also influence the amount of condensation.

In the early days of RVing I always thought that I had a WH leak when I saw the condensation coming out the first time each season I used the RV.

Can't explain the debris in the burner ares, burnt bugs perhaps? Also looks like you had a leak around the drain/anode.