"I suspect you meant convection."
Yes I did, but I used a real word, so spell check said it was okay. Who I to argue with spell check?
"Could the lack of a nipple be why sometimes I find the cold inlet pipe very warm or even hot near the top of the heater? Code violation??"
Not the lack of a nipple, the lack of a heat trap.
The old fashion way to make a heat trap is to come up out of the water heater about 9" or so, elbow the pipe horizontally for 6", elbow the pipe down for 6", elbow the pipe back out horizontally.
Now CONVECTION will not get past the heat trap as the hot water rising basically stops at the top of the loop. Yes, there is some loss of heat radiating from the pipe which is looped, and that is replaced with more heat as it radiates the heat and cools slightly, but the greater heat loss from the CONVECTION flow is stopped.
The heat trap nipples reduce that heat trap loss down even more.
If you have a single story house where the pipes come up out from the floor, to the water heater, then back down to the under the floor (slab, crawlspace or basement), you have a built-in heat trap. If the pipes, even just one, goes up from the water heater, that's when you have a heat loss problem and need heat traps. BUT, the heat trap nipples DO reduce heat loss even from that built-in heat trap by eliminating the heat loss from the pipe. That heat loss is lost (wasted) energy and is why it is in the energy codes.
This is from the IECC (International Energy Conservation Code).
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504.4 Heat traps.Water-heating equipment not supplied with integral heat traps and serving noncirculating systems shall be provided with heat traps on the supply and discharge piping associated with the equipment.
Code violation? Yes, most likely, if there is an energy code in force and if there is not hot water re-circulating system (the heat traps would be useless with a hot water recirculating system, well, the cold inlet one would be okay, but there would be no need for the hot heat trap, and, in fact, it might make a noise similar to water hammer whenever the pump was running).