A line T-ing off my water heater drain line. What might it be for?
Most Likely - the return line of a hot water recirculation loop. ie, "instant hot water" by means of a circulating pump which pulls hot water from the hot line and returns it to the hot water heater through this tee on the drain line, after running it through the supply lines to your faucets. Given your location 2 (3?) stories above the heater this seems very likely (no guarantee that it's working, but the system was installed at some point, anyway.)

So yes, it's full of hot water under pressure. Sounds like decent workmanship if it's fully insulated.

If you do not have a long wait for hot water, it's probably functioning.