Down draft problem With fireplace, behind insert

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I don't think a leak from it could get into the fireplace but the base of that chimney is in serious need of a good flashing job.

It appears to have step flashing but no counter flashing. Thats the way mine was too, a lot of people don't realize that a masonry chimney requires both. It's just a matter of time before a leak develops with no counter flashing.
 
Where does that opening on the left of the capped chimney lead to? Why is that not capped?
 
I just read your op, you may have mold in there behind the insert or even above it, if it were me, I would take out the insert and inspect it from the bottom and the top. You also mentioned you need a 15000$ repair, you must have some sort of decay in there. Also you need to identify what you are smelling, ie, old creosote smells when wet, mold, fungus. I say take it out and have it inspected. Gl
 
And have it inspected by someone other than the guy that said it would take $15,000!
It very likely was a scare tactic to get you to hire him for a full reline and tuck point. I'd get a second opinion!
 
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Do you have central AC? What is the ducting like? how many inlets/returns? Is the room open or closed to the rest of the house? In the original post, it was said that the smell came back when the ac was turned on. Makes me think that your AC is pulling more air out of the room than its delivering to the room. So, to compensate, air is flowing down the chimney...picking up smells along the way...
 
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