I don't always trust mainstream architects and engineers either, but in this scenario the hot gases exiting the top of the water heater rise passively by convection. You don't want exhaust gases hanging around in your house, do you? Convection is the engine which draws the gases out of your house up the flue. This is no more of a "waste" than putting bumpers or a windshield on your car. Think of how much more efficient a car could be if it did not have to bear the weight or wind resistance of any safety feature on it. The engineering of safety features of any product nearly always have to strike a balance with added initial costs of manufacturing and lifetime costs of operation, and inefficiencies incurred.
The more efficient furnaces and water heaters which extract more heat from the exhaust gases require an electric blower just to pump out the exhaust. This makes them more complex and less reliable. One house I rented for 3 years had a furnace that the exhaust blower failed twice during that time period.
While I like your idea of re-using the old water heater AND of re-purposing the exhaust gases to prevent freezing in the pre-heater,
please make sure your re-routing of the exhaust doesn't weaken the convection engine which is supposed to draw the potentially poisonous gases safely outside of your home.
In my house, one thing I've done that reduces (somewhat but not dangerously) the exhaust temp of my radiant system boiler and my water heater is to limit the flow of the gas supply by partially closing the valve on the supply pipe approaching the 2 appliances. The reason I originally did this is a bit of a long story, posted on another forum --->
Mysterious gas water heater problem - DoItYourself.com Community Forums