There is some good logic for replacing a 20 yo heater now, but until it starts leaking, it's not absolutely necessary. As far as the vent is concerned, that can should be easy enough to fix. Metal vent pipe is not expensive and is readily available. I would suggest you start saving for a new water heater though. Twenty years is way past normal life expectancy for these things. I don't know if $1200 is really necessary, but you local prices may be different than mine.