CO (okay, I'll be the pedant), not CO2 (carbon DI oxide, which is present constantly in the atmosphere and is harmless) detectors are a legal requirement in most states.

The problem with the things is that they, like smoke detectors, tend to be hypersensitive, particularly if you heat totally or in part with wood.

We have 2 combo smoke/CO detectors sitting in a closet, because I got tired of listening to them go off for little to no reason when we were either cooking or had a fire going in the fireplace.

Glad to see the issue was found, and every once in a while lousy insulation helps! (Our hot water heater is in the basement, and with the "insulation" of our basement, it almost might as well be outside!)