when the risk of making a big boom is more than present I do not like the idea either .... Since I do not master the subject at all, I really discover thanks to your subject, I will therefore follow your discussions now
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and above all to "trust" you ...
By cons for your insulation (I master more;)), on something like this it is quite possible to make a system based imr well implemented, or PIR foam, see both to have something very effective for the wooden case, and for the water heater I think I would try to grab some two-component PU foam to inject yourself, or if the price is too expensive redo a case around the heater water ...
