Water Heater and plumbing problems

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I have a Whirlpool, 50 gallon gas water heater located in a converted garage on an elevated base next to the forced air unit. We have a 2850 square foot, two story house. The water heater is 12 years old.

The water heater stopped heating and has water in the pan, so I assume it is shot. I've had some noise coming from it for a few years and I only flushed it out a couple of times and that didn't appear to be effective. So, I assumed it was time for a new one.

I'm a middle-of-the-road DIYer, so I thought I'd replace it myself as I did with the current one 12 years ago. I have a bit of a safety net with a father-in-law who is a retired plumbing subcontractor, but that's not always effective.

I had quite a bit of "patina" on the hot water return line. My father-in-law said it was no big deal and that I should just use a wire brush on it. But, after I turned off the water to the water heater and tried to drain it, I started getting water leaking from the hot water return line. I had turned on a couple of hot water faucets upstairs and they were dry. I was still getting some water out of the hot water faucet in the downstairs powder room. Apparently, after just touching the patina I uncovered some pinhole leaks in the supply line, but where the heck is that water coming from?

I tried to drain the tank, but it was still draining after a few hours so I have to believe water was still getting into the tank. I loosened the nut on the hot water supply to allow air to enter and put a bowl under the leak.

We had been running the washer, so my FIL suggested that maybe the solenoid was stuck open because there had been no hot water supplied. He suggested that I do a load with only cold water. I did, but that amplified the leak. I tried turning the water off at the gate valve on the front porch, but there was still a leak so I had to turn off the water at the street.

This morning, I turned off the water supplies to the washing machine and turned the water on and the leaking out of the hot water supply for the water heater stopped. But, the moderate trickle for the power room hot water faucet continues.

I know this is long, but does anything have any thoughts or opinions they could share?
 

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