the external vent is higher than the burner flame, intended to vent combustion gases.  Propane is heavier than air.

Don't know about your jurisdiction, but water heaters here require external combustion air via a pvc pipe, now.  Lots of grandfathered installations, however.  You are still correct about where the gas might go, though, inside the house, since it is heavier than air.  If the hot water heater is basement installed -- pooling.  for that matter, even if not in the basement, if there is a basement, then pooling.
---- Alistair Bell <albell@shaw.ca> wrote:
> dometic fridge has sealed (if drain cap is in place, which it always
> should be), externally vented combustion chamber.
>
> in the unlikely event of TC failure, gas will make its way out of van.
>
>
> domestic water heaters take combustion air from "inside the house",
> TC failure could let propane leaking into living area.
>
> this is why it is not an apt example.
>
>
> alistair
>
>
>
> On 5-Nov-10, at 8:24 AM, Dave Mcneely wrote:
>
> ---- Alistair Bell <albell@shaw.ca> wrote:
> > different mechanism in the van. default is valve closed/gas off. TC
> > keeps it open, barely
> >
> >
> > home furnaces and water heaters are not an apt example in this case.
>
> If the flame is burning, the thermocouple is hot, and keeps the valve
> open.  if the flame goes out, thermocouple cools, valve closes.
> Identical operation in hot water heater standing pilot, furnace
> standing pilot, and Dometic refrigerator burner.
>
> David McNeely
>

--
David McNeely