That outlet looks exactly like it should if an exception has been granted in your building permit or inspection (check). I don't entirely disagree with the idea - bonded copper pipe is pretty good grounding - but you want to make sure that sticker is approved and not a flight of fancy. Also for aesthetic reasons, I would make another label and hand-snip the ends and move it down a bit so the label is entirely on the flat part of the cover.
GFCI receptacles have an optional feature called "Downline Protection". If you do not use it, only the sockets are protected. Wiring this is very easy: attach all wires to "Line" terminals, and the instructions explain how to attach 2 wires to those.
If you do use Downline Protection, you can use this GFCI to protect additional outlets or points of use, by attaching them to the "LOAD" terminals. If this is done, the protected outlets >MUST< be marked "GFCI Protected" via any means not hand-written. This should never be done by default/in ignorance/by accident. To novices I advise "only use LINE".
Unfortunately, most people who install GFCIs are positively pathological about always using Load for all onward wires, and hilarity ensues. In their defense, the GFCI instructions advise doing this. But it's illegal if they don't label too.
People like using the downline protection because it's cheaper than a GFCI at every socket.
However, if the GFCI outlet is tripped, all outlets, including the Non-GFCI outlet for the water heater, lose power. Is this correct?
That's normal if the GFCI is installed in the typical way, with all downline outlets wired to LOAD.
Circuits must be wired (well, cabled) in a tree topology. Cables can branch but not loop (Britain excepted). Most circuits are wired in a species of tree called a 'vine' - a straight daisy chain.
If you want to defeat GFCI protection to this outlet, simply identify every receptacle in the circuit and replace them all with GFCI receptacles, and don't use "Load" terminals on any of them. (Well, if you map out the tree, and you find several receptacles are past this one, you can use downline protection on that part of the circuit).