The water heater may incubate the odor and intensify it, but I doubt that the substance or odor are caused by the water heater. The only times we have experienced such odor is when first using a well that has been idle - not pumped - for a period of time, and the odor usually disappears after a few uses of the water system from the well. Definitely a Sulphur odor for a while, then gone. I think someone has said more about this earlier in the thread.
