I would like to know what's inside the 'broken instant water heater' - a convenient part to find, for sure!
I notice your second fire was a little harder to get going, after you shortened the chimney and put the cool mass of the water-heater on top. And there was a little smoke from the second version, too. You might be able to fix this with some insulation around the chimney (below the water heater). Loose dirt, or mud-bricks made with a lot of sawdust in place of straw or sand, could work. Assuming you want to keep doing the junkyard style - rock wool, perlite, or non-flammable insulation like that would also work great.
There's something so satisfying from making a stove that's mostly dirt, though, isn't there?