+1 on the CO dectector.
Unless you're planning on doing wet plate work no B&W chemistry or materials are particularly dangerous near things like water heaters or boilers.
But the water heater does need adequate combustion air both for its operation and for the flue to vent properly, so you'll want to make sure your ventilation is good. You may need to put some sort of baffle in front of it so that it doesn't make unwanted illumination.