I am not familiar with that specific model but that certainly does not seem right.
I would check the thermal fuse on the unit to make sure that someone did not bypass it. If that looks good, I would check to see that it has styrofoam insulation around the tank. If you are lucky there will be access somewhere around the back of the unit. Probably in the area of your crispy wall. If you are not lucky, you may have to pull the HW heater to check the insulation.
If you don't feel comfortable with doing this type of work, take it somewhere to have it checked out. Either way, I would not use the HW heater until it has been checked.