The key to a great paint job is to repair all the dry rot first. Some painters will paint over dry rot which seals in all the moisture causing the dry rot beneath the paint job to spread.
Getting the right windows and installing them correctly to seal your home against water intrusion is critcal.
Your water heater installation will be 100% compliant with code. My goal is to replace everything that “could” go wrong, not just replace what is already broken. Your new water heater will be problem free.