yes, heat your attic
sanrishi, no need for the sarcasm about heating the attic.
If you understood venting principles, you would know a hot flue is a happy flue. Interior chimneys perform better than exterior chimneys all things else being equal. Why? Because they are warmer. If you enclosed the pipe in a small chase still meeting your clearances, the pipe will remain warmer. This will help maintain a stable draft and minimize the cooling of the stack gases to their dewpoint, which is where you're getting the condensation we're trying to help you with.
What does it say about you trying to put your hand on a hot pipe? Do you REALLY want me to answer that one? FYI, if it was B-vent as opposed to single walled pipe, it would feel cooler on the outer wall because the B-vent is insulated, therefore keeping more heat inside the pipe,which is what we're after.
Sorry I wasted my time trying to help an ingrate...
Keep the fire inside the fireplace.
You can forgive my ignorance.
As you advised, I have checked the system setting in tstat. It was set to 6. I have changed it to 3. Now, the fire stays on for longer(actually it stayed for 6 minutes as opposed to 3 minutes when the system setting was set to 6). But, I still collected some water in the attic overnight( less amount of water than it used to be). Can I just leave the setting at 3? Would longer run of fire harm the furnace in any ways?
Furnaces are designed to run constant.
The thermostat suggestion was for short cycling and has nothing to do with the condensation.
You have been advised to have your furnace clocked and set to the proper firing rate.
You have also been advised that it is possible that your B-vent chimney is too large of a diameter and that you should have a 4-inch double walled vent connector from the furnace to the chimney.
Can't do anything more for you online. Call the gas authority there whether it is the gas company or a city inspector.
The way we build has a greater impact on our comfort, energy consumption and IAQ than any HVAC system we install.