Umm, Mtry? He was correct.
Example, a 40 gallon tank with two teenage girls. Guaranteed, the tank will be sucked dry of hot water on a daily basis. When that occurs, the cold refill water can easily take the tank wall temperature down below the dew point of the surrounding environment. When that occurs, condensation will result. The fiberglass blanket will trap that moisture, and hold it against the steel. As the steel heats, the moisture will indeed cause rust. And more than if the fiberglass were not there.
This is also an issue for home heat boilers when radiant heat is piggybacked onto an existing baseboard system. If the return water is below the dew point in the (basement), the external surfaces of the boiler will condense humidity. If the boiler is gas, the dew point of the exhaust will have a high dew point, guaranteeing a quick rust out. (this can be seen by putting a pot of water on a gas stove...immediate condensation occurs on the external surface especially above where the flames are, and when the water inside exceeds the dew point of the exhaust, the condensation dissapears.
But yes, his initial statement did seem counter-intuitive, didn't it?
Cheers, John