Combines intake and exhaust on gas w/heater?

Yes it looks like the Hy-vent on the air scoop has been fouled. Should be a simple fix to replace.

That exhaust/ intake is a concentric set up.

Often that is called a "bazooka" termination. The piping most prob does not combine there… just the penetration.

It does look like it could have a bit more support.

maybe… verify

My Bet is that they are using the water heater to heat a radiant set up or an air handler.

Some people do that sort of thing….

does it have a mushroom cap on the outside like this. If so it is a concentric kit.

The black upper part of that Honeywell air vent rotates to an on/ off position so you can service it. But I would just replace it at this time.

I'm guessing that is a hydronic system? I've never seen an air purger on a domestic water heater? Certainly not an iron bodied type?

That looks like a solar indirect. Can you sketch the piping layout for the site? My guess the polaris is supplying hot water directly and space heat through the indirect tank.

@guzzinerd Said: Went over to a neighbor's who asked me to look at her water heater that isn't working. The code it's throwing is failed ignition so I told her she needs to call a professional

Good Call! If you have no Idea on what to do, then put your hands in your pockets and back away from the problem until you can find out more about it

@guzzinerd Said: While looking it over I noticed that the intake is tied into the exhaust pipe near the inside wall.. shouldn't they be separate?

What you are looking at is a proper concentric design venting system. Here is the detail on that design.

THE EXHAUST GASSES FROM THE HEATER WILL EXIT IN THE CENTER (Orange) VENT PIPE THAT GOES FULL SIZE 2" THRU THE MIDDLE OF THE ASSEMBLY. THE AIR INTAKE COMES IN THRU THE LARGER OUTER PIPE (Blue) THAT IS AROUND THE EXHAUST PIPE. THIS IS CALLED A CONCENTRIC VENT. YOU CAN MAKE ONE LARGER HOLE IN THE SIDE OF THE BUILDING AND HAVE BOTH INTAKE AND EXHAUST USE THE SAME OPENING.  SINCE THE INLET AIR COMES FROM NEAR THE BUILDING AND THE EXHAUST IS PUSHED STRAIT AWAY FROM THE BUILDING, THERE IS LESS CHANCE FOR THE EXHAUST TO FIND ITS WAY BACK TO THE AIR INTAKE.

@guzzinerd Said: She does have hydronic heated floors using a separate heater in the basement.

That is the wrong heater for a closed system. But that does not means someone mIght not try to make it work. I have used a water heater to do space heating and learned the hard way that Cheap isn't always the lowest cost way to do things. Ask Me how I Know?

@guzzinerd commented on @kcopp's statement: "Often that is called a "bazooka" termination. The piping most prob does not combine there… just the penetration." Only one pipe comes out of the exterior. Are you saying it should be divided from that point to the outside?

See my reply above about the Concentric. And I never heard it called a Bazooka.

@guzzinerd Said: Below the other water heater, this is what's running the hydraunic floor heat. The other water heater that's not firing right now is for the shower and sinks, residential.

There are parts on the potable water system that have no reason to be there. I can see that the owner of this location is not afraid of using unqualified and incompetent people to save $$. Those inexperienced people often charge less because they really don't know what they are doing. I would not offer any guidance @guzzinerd . Your inexperience may come back to haunt you if you get involved. 

Since it sounds like the heat is working, I would not worry about how it is plumbed. If the Polaris is not connected to it, it doesn't matter.

The cast iron air separator on top doesn't make sense though. Thick casting like that will last a very long time in fresh water, so except for a bit of rust, it doesn't matter it is there.

Auto air vent should always be closed after the system is filled otherwise they will leak. Make sure to close it after replacing the current one.

nice work!