The area with the water heater is in is warmer so there will be no condensation in that area. When the moisture gets to an area with cooler walls, the moisture will condense on a cooler surface.
The moisture must from faulty ventilation of the flue gasses somewhere, so that should be corrected.
The condensation, moisture and mold on the insulation anf raming can be corrected. Any life problems are not as simple and they can go undiscovered for a long time.