Pipe nipples on water heater leaking
You usually just need to use about 3 flat wraps of teflon tape on pipe threads, wrapped clockwise only as the threaded end faces you. Add pipe dope too, if you choose. I never do, as the tape works just fine.
I hoped that you're using di-electric nipples that help prevent electrical corrosion between two dissimilar metals (cast iron and brass, for instance), and not plain galvanized nipples.
The latter will corrode quickly and put rust into your hot water.