We have not had any problems with our water heater but I would guess it is the thermostat too. You might want to look at the bypass valve and see if it is maybe partially open. If it were, I would think that would allow some water to bypass the heater and remix on the "other side" with the heated water and consequently cool it down. It is probably not the problem but under the category of eliminating all possibilities, it might be worth a look.
07 Cruiser 29BT
04 2500 Hemi Ram Quad Cab