Leaking from the intake area on top of tank with water penerating along inside/insulation and ultimately draining near draingage valve ...
Firstly, don't confuse condensation on the pipe with a leak. The cold water inside the pipe makes the pipe cold. The warmer air around the pipe causes condensation to appear - much the way a glass of cold water "sweats" on a table in a warm room.
Next, determine exactly where the source of the leak is. If it is at a soldered or threaded junction of pipes or pipe an tank, you should be able to solve it - if you know how to solder.
You'll have to power off the tank at the circuit breaker (or shut off the gas supply if not an electric type) before doing anything else. Next, shut off the cold water supply to the tank. This valve must be on the supply side of the leak. If the leak is ahead of the valve, you might need to shut off the water to the entire building. Then, open the closest hot water faucet. Finally, lower the water level of the tank by draining the tank from the bottom valve (you'll need to connect a garden hose to it and run the end to the outdoors, shower drain, toilet, etc.). Keep in mind - the water will not drain "up hill". That means the end of the hose must be lower than the top of the tank. You do not need to drain the entire contents of the heater unless you need to physically move it (or if it is a natural gas or propane type - as a licensed plumber or pipe fitter will be required to disconnect / reconnect the fuel line). A few gallons of water should be enough to allow working on the pipe without causing spills.
Disconnect the cold water supply pipe from the tank - above the source of the leak. You may have to do this by un-soldering the nearest pipe coupling with a propane or mapp gas torch. Soak a thick cloth in cold water and wrap it around the pipe at the tank's inlet to prevent the heat from the torch from damaging the plastic inlet fitting inside the tank. If the inlet connector is melted or damaged; the entire tank must be replaced. Additionally, you might need to unsolder the hot water piping to get better access to the cold water pipe. Only disconnect as much as needed to do the job.
Once the pipe(s) are disconnected, remove the section of pipe that mates with the leak. You will probably need wrenches to unthread pipe sections or fittings so that you can carefully inspect the male and female threads. Fully remove the pipes & fittings and obtain replacements as needed.
You might want to think about installing unions on the hot and cold water pipes. These will make future removal of the tank very easy with no need for soldering. Doing this will increase the time it takes to do the job this time, but simplifies tank removal in the future. You're already into this job - and its only few more extra steps.
Before reassembly, you should provide several wraps of teflon tape around the threaded portion of all male pipe threads. Telfon tape is highly suggested as it is clean and very easy to work with when compared with pipe dope that is applied with a brush. Carefully thread the pipes into the fitting(s) on the tank hand tight. If you are presented enough pipe or fitting to hold the tank inlet fitting, do so with a wrench. Use a second wrench to fully tighten the pipe into fitting. If there is no way to hold the inlet fitting, use a wrench to tighten the pipe about an additional full turn. Always use two wrenches to tighten pipes into fittings when possible. Make up any other threaded fittings (unions, etc.) and pipes as needed. Dry fit the copper pipes together - cut long pieces and replace short pieces of pipes as needed. Once all the pieces are are the correct length and fit together properly prepare for soldering. Clean the outside ends of all copper pipes and insides of couplings and connectors to be soldered with emery cloth, sand paper, or wire brush tools designed for expressly this purpose etc. until they are fully scuffed up and are bright and shiny. Wipe any dust and debris from the pipe with a clean, dry cloth. Try not to touch the cleaned parts of the pipe with bare hands. Apply a light coating of soldering flux to the cleaned ends and fit the pipes with couplings together again like the dry fitting earlier. Place a wet cloth around the pipes nearest the inlets (as before when removing the pipes) once again.
Heat the couplings and fittings one at a time with just enough heat to cause the solder to be wicked into the fitting. It is important not over heat the fittings or pipes. Be sure to let solder flow all the way around the pipes and into both ends of the coupling to ensure a complete solder seal both in and out of the coupling. Wipe away excess solder with a wet cloth to keep your work good looking. Once one fitting has been completed, go to the next and repeat until all fittings and pipes are soldered and clean. A good soldered joint should have a ring of solder visible all the way around the pipe inside the edge of the coupling.
If you've never soldered before, you should practice before doing this repair. Botched soldered joints could result in water damage and additional repair work that is greater than the original problem. Of course, a licensed plumber will make short work of this job and is an excellent alternative to DIY when money for the repair is available.
Good luck!
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