The “heavy musty” smell your wife is mentioning is probably  “products of combustion,” or flue gases, from a gas fired appliance.  I suspect this because you mentioned that there is a gas fired water heater located in the laundry room.  The fact that you mentioned she only observes it while doing the laundry (and not all the time),  suggests that the smell is the result of something specific occurring on an intermittent basis. 

 Under normal conditions as the burner on a gas appliance burns the gas, the remaining products of the burned fuel rise up through a metal flue pipe to the exterior of the house.  However, conditions can be created to draw the flue gasses back into the building.  This is known as back drafting.  Flue gasses that are allowed to enter an enclosed space or interior room are moisture laden, and mixed carbon monoxide, nitrogen oxides and small amounts of hydrochloric and sulfuric acids  This mixture causes the “heaviness” of the smell, and the condensation that you observed.  Under normal circumstances, this should never happen, and presents a dangerous condition.

 Back drafting of gas fumes can be caused by either a blocked flue pipe, or when the air pressure inside the house is less than the air pressure outside the house. 

If the flue pipe to a gas appliance is blocked with leaves, debris, or nests, the flue gasses cannot easily escape to the exterior, and flow back into the interior of the house.

However, a more common cause of back drafting is when there is negative air pressure inside the house.  Negative air pressure is created when some of the inside air is removed from a building and not replaced.  This often occurs during the winter, when houses are kept closed and tightly sealed.  If a house is closed up, and exhaust devices such as range hoods, clothes dryers and bathroom fans are running, air is being blown outside of the house and not being replaced, and this decreases the air pressure.

What is important to note is that the drop in air pressure required for back drafting is so slight, that it is not felt or noticed by occupants of a room.  Combine this with the fact that there is not distinct odor or smell to flue gasses, and you can understand why so many people have either gotten sick or have died from exposure to these fumes.     

Another component of a house that can contribute to back drafting is the furnace system.  Believe it or not, a loose or broken piece of duct pipe can also cause a decrease in the air pressure of a tightly sealed house.  When the blower in a forced air furnace turns on, it draws in the air from inside the house, heats it, and then blows it back into the various rooms. If there is a broken duct joint in the attic or sub area, it will blow the air to the outside like a big exhaust fan, and decrease the pressure in the house.