Water – Properly venting water heater

The meter likely has rubber gaskets that make a seal between the meter body and the pipes; like a garden hose. Temperature changes or age (likely only if the city installed a used meter with used gaskets) could have changed the pliability of the gaskets. I can't say if the nuts loosened, but there shouldn't be any teflon tape or pipe dope on the threads. If they start to leak again, or if you're sufficiently worried, you can check the gaskets. Turn off the water at the main and you can easily take the pipes apart from the meter and inspect the gaskets. New ones can be purchased at any plumbing supply store for a couple bucks.

Probably not the answer you want to hear, but the manufacturer of your heater would most likely prohibit the alteration of air flow into and out of the unit. Doing so would void the industry safety certifications required for manufacturers, the warranty, and would probably not be safe.

Additionally, all wall heaters have minimum clearance requirements for the placement of objects in front, 8" is likely too close for placement of combustibles (like wood cabinets).

I would recommend that you discontinue use of the wall heater if it does not fit your design plans. There are many types of plug-in electric room heaters that work for a variety of room sizes. Many of these are very quiet, inexpensive, and efficient (probably more efficient then that wall heater) and you can place it anywhere in the room you want.