Even without cutting the foam the water heater puts out heat, A few small holes would allow some of it in to the cabin. A small computer fan would help, it just depends on how often the WH fires. Ours in under the bottom bunk and in the summer with the WH on it would miserable to sleep there. Quite toasty in the winter though.
I thought about doing a solar water heater diversified load and decided it would be a lot of money for hot water we don't need later on in the day. With a tank the size of a fresh water tank I think you would be better off with a hot water panel and do it old school. You could even paint a white hose black and coil it under your solar panel, pump your fresh tank thru it and pick up more BTUs than the PV can do alone.
