Well, after several months of complains by the women folk in the house, finally fixed the water heater. I have a Ruud Gas heater, installed in 1998.
The problem: very little hot water. Water was quite hot, but got to be lukewarm very quickly.
The solution: the plastic dip tube in the cold water inlet was broken, and this allowed the cold water to fill in at the TOP of the tank, which diluted the hot water there and short cycled the tank. Apparently this is as big issue in the late 90's, as some defective tubes got to market. I think maybe my tube was on the end of this problem -- the tank has a '97 build date.
It was pretty hard to find replacement parts on a weekend. Forget the big box stores for parts (other than thermocouples). The local hardware store had a good set of parts, but the dip tube was too small.
I fashioned one using CPVC -- high temp PCV, which I flared by forming the pipe with a hot piece of copper tube (heated by a hand held torch). Trying to put the torch on the CPVC pipe itself would burn the tube (TOO HOT). Put a bend on the bottom of the tube as well to swirl the flow when the water in coming into tank -- keeps the sediment stirred up between flushings. Piece of CPVC was about $5, and took 10-15 mins to fashion a suitable tube.
I also replaced the anode rod in the tank. Apparently, you should replace these every 3-5 years -- though I don't know anyone who does. Easy fix but getting the old rod out was difficult. Easiest method was to use my electric impact wrench and a 1 1/16" socket -- this did the trick. A breaker bar didn't -- or I was unwilling to put enough pressure on it as I was concerned about damaging the tank. Anode rod was about $13.
I also put on heat trap fittings. I had noticed that hot water crept up the cold water line -- heating it up within about 5 mins. I don't know how much hot water I lost this way, but couldn't have been good. These seemed to work well. These fittings for both hot and cold lines (the two are different ) were about $8 for the pair.
Note that most of the big box people I talked to were clueless about heat traps, inlet tubes, or anode rods. I guess you should go directly to a plumbing supply house, or a good hardware store (one with trained people).
Note that various advice by talking to people were "Replace the tank" ($350-500), "replace the thermostat" (about $120), to not knowing anything. I hope this post helps someone in a similar situation.
This site helped a lot in understanding the issues -- though their parts are expensive: http://www.waterheaterrescue.com/
and probably bulky to ship.
All in all, easy once you know what's going on, but confusing to learn the first time.