It appears my pressure relief valve is leaking as the water is dripping from the pipe outside. There are no other water heater issues. It's a dual valve system. The 125psi is leaking to outside, the 125psi is perfectly dry. People I've called in want to replace the entire water heater which seems logical since it's 20 years old and there's a tiny bit of rust at the very top. One firm won't replace the WH because the C type venting of the furnace is shared by the water heater and is less than 6 inches from a beam... so they want to change me from gas to electric. The furnace venting has been like this since the house was built in 1965. I'm getting several estimates but everyone is telling me something different and it's been suggested I simply replace the furnace, too. Remember, I get hot water just fine. Do I get more estimates and go with the solution I get the most of?

I want to refer you here: Fire Safety Clearance Requirements between Metal Chimneys & Combustible Materials

I'd ask about installing a heat shield to reduce the clearances required.

20 yrs and rust suggests replacing the water heater.

PRV's leak because:
1. age
2. water pressure too high > 55 PSI
3. A PRV or backflow preventer is installed without an expansion tank

KISS is giving you good advice. I would like to ad that Relieve Valve will also leak if water temperature is too high... and - of course - I am sure KISS meant 150psi of pressure.

As far as the venting goes: change vent to Type "B" gas vent. Also, make sure the combined value of BTU's for water heater + furnace equals to the correct size of the vent.

I actually meant the "cold water pressure" should be 55 PSI. Higher than that valves tend to fail in the house. If incoming house pressure is 100 PSI, the t & P could leak and so could other valves in the house. If it is 100 PSI, it has to be reduced with a PRV. Once a PRV is installed, then one has to evaluate wheter an expansion tank is necessary.