A.O. Smith Natural Gas Water Heater with a Gov't Energy sticker dated 1994, but house was built in 1997. We've lived here for 3 years and no problem with the water heater until last week. We noticed after running dishwasher or doing a couple loads of laundry, we had a water trail from the water heater to a drain in the basement floor. 

It took a couple times, but finally traced the leak to the water pipe coming off of the release valve pipe. Going on a friend's recommendation, I toggled the release valve up and down once and a large rush of water started coming out. It kept up this pace for a good 30 seconds as I dumped bucket after bucket. It wasn't until I toggled the switch a couple times (thinking maybe it was stuck open??) until the flow slowed down. After 30 minutes later, it finally went from a stead drip to no more water. 

Water pressure and recovery hot water time and temperature seem OK with showers, sinks, etc. So I'm confused as to what might be wrong.

I went to Sear's today and saw, if I need a new one, looks like I have to buy a "power vent" model due to the installation I have (coming in at $719 for a 40 Gallon). 

I'm hoping someone can shed some light on this problem before I replace my water heater. 

Thanks