High concentrations of cedar oil can kill clothes moth larvae, but you're not likely to find levels that high in a cedar closet...not for long, anyway. However, the smell of cedar oil blocks the moths' ability to detect a food source for their potential offspring (that is, your woolens as a place to lay eggs) and also interferes with their pheromone detection, so they can't find mates. Herbs like citronella, peppermint, and rosemary do the same thing. Insect pests tend to stay away because it messes up their natural navigation systems. Not all insects are repelled by cedar (Dermestid/carpet beetles, for example, are not) but most moths with wool-eating caterpillars are. As Mike said, running a little sandpaper over the cedar planking refreshes the aroma. Should you have a cedar closet? Well...do you have a lot of good-quality woolens to store-- cashmere blankets, nice wool coats? If so, I think a cedar closet would be a good idea; if not, there's not much point. You can put your woolens in air-tight bags, but they can come out musty if there's any moisture (even from high humidity when you seal them up). Moths can get into openings one tenth of one mm in size, so most sweater-box storage containers aren't tight enough to exclude them. If you've only got a couple woolens to store, Zip-lock bags in the freezer is one pretty safe option. If you're so-so on the smell, I wouldn't think it'd be worth putting in more than one cedar closet. Also, you mentioned the cooler, damper basement closet-- you might have problems with cedar planking warping and curling. I'd stick with mold-resistant Sheetrock for that one. Good luck with your finishing work!

We have carpet in the closet and yes we had some flooding in the basement 7 years ago but not near this side of the house (and all carpet was replaced and the basement was treated by Servpro). I just opened the door (first time in 4 days) and it smells so much better...like cedar! Maybe it just needed a few days? I'm hoping that other stale-old-hamper-clothes-odor won't return. Thanks for your response.

Thanks Weedmeister. Hmmmm, this brings up another issue I briefly read about on another thread. I don't know anything about this and would have never thought of it on my own. If we turn off the water supply, flip the breaker on the hot water heater and don't drain it, will the water be skunky monkey when we return a couple months later? Or, when we fire it up upon returning will that kill the bugs? After all, this does supply our kitchen. Draining it is not gonna happen, and I am probably making a mountain out of a mole hill here, but just thinking out loud. I wish my heater was on an outside wall. That would help. No such luck. The original floor plans called for this water heater to be installed in the attic. Our builders told us how much more trouble and expense it would be to install it that way. They convinced us to put it in this pantry closet. I don't think the attic would have been any better.....maybe in some ways even worse. Every replacement would have meant dragging a water heater up one of those pull down attic stair deals. Yikes! Makes my back hurt just thinking about it. Thank you.....thank you all.

Update: Managed to get a plumber to come in to perform a second opinion. I wasn't able to be there again (I live 7 hours drive away) unfortunately, but on short notice, and a looming inspection contingency deadline I thought it was the best option. Plumber isolated different areas of the bathroom to see what would generate a leak. It is, in fact, the grout (or lack thereof). I suspect that the tile is placed directly over green board. The sellers have offered to give us a credit at closing for the repair work on the tiles ($350), but I am insisting that they do it themselves. I can imagine that this could turn into a much bigger/more expensive repair once tiles are removed and greenboard uncovered. So, I don't think their credit at closing is sufficient. We'll see if they go for it. Thanks for the help everyone!