The problem is indeed caused by condensation, but IIRC, most of the condensation comes from the exhaust gas itself, instead of the surrounding air. I think it has something to do with water being a by-product of methane combustion.
I used to work in a plumbing supply house, and we’d see a lot of gas water heaters brought in for scrap which had rusty tops. This wouldn’t have any effect on the operation of the heater itself, as it’s a glass lined tank, which is surrounded by insulation, and contained in a metal jacket. Even if the top of the jacket were completely rusted, it would not reach the tank itself.
Part of your problem may be the flue itself. If it goes straight up, then any condensed water would run back down, then along the sides of the bell hood and drip onto the top of the heater. Most installations I’ve seen have at least one 45 or 90 degree bend. That might have something to do with it.
At any rate, I wouldn’t insulate any flue pipe, since they get quite hot and you’d have a fire hazard, or at the very least, some funky odors coming from cooked fiberglass. The insulation in the heater is only subject to a temperature range of approx. 120 - 150 F, much lower than a flue pipe.
On a side note, you have more of a rust problem to worry about from inside the tank, and with the T/P valve, than you would from the flue. If you’re not doing so already, you should drain off about a bucket of water from the bottom drain valve every 1 or 2 months. You should also open up the T/P valve just for a second, to make sure it’s not sticking. (Your T/P valve will be up near the top of the heater, and has a small lever-type handle on it. Most codes require that the valve be drained to the outside of the house. If you have no pipe attached to it, use a bucket, but be extremely careful, as the water will be very hot and under some pressure. You only have to lift the spring-loaded lever a bit to get water to come out.)
My advice would be to go down to Home Depot, or whatever you have in your area, and ask about the rusting problem, so you can get another opinion. It’s probably nothing to worry about, and it might be solved by changing your flue pipe configuration.