The failure of the mortar joints between refractory liner sections is the cause of not having use of the chimney. Replacing this mortar will fix the problem and allow use of the chimney for at least another 20 years. Chimney repair services take a closed cell foam torpedo attached to a winch and pull it through your chimney as they pour a special type of silicon-based mortar that is fire resistant to over 3000 degrees Fahrenheit, well exceeding International Residential Code requirements. As the torpedo is pulled up the chimney, the torpedo vibrates, pushing the mortar into the joints and filling them completely. After the torpedo has gone through the chimney and mortared the joints, the chimney cap is installed and the fireplace is ready for use again.
Ventless gas fireplaces require a gas line and proper clearance from combustibles per the manufacturer's recommendations. These units are 99.9 percent efficient, operating at close to complete combustion, using almost all of the chemicals to make a fire. This creates little carbon monoxide and prevents sickness or injury from CO poisoning. The ventless gas fireplace is inserted into the old chimney space. Block off the chimney from below. Block if off from above by installing a sealed chimney cap, and discontinue using the flue.
If the chimney only vents the water heater and the furnace, vent both of these units outside through PVC piping as it is more efficient. Take the chimney down below the roof line, sheet and shingle over the hole. Deal the chimney in the attic using spray foam insulation to prevent cold drafts to the rest of the house. With this process, you need never worry about chimney problems again.