"...A severely blown head gasket would only add air and cause the coolant to bubble, not lower the level..."

I'm going to lean a slightly different direction - may be totally wrong....

He says he loses water while the car is sitting, yet it's not going into the tranny, not filling the crank case, not leaking on the floor board (although he "smells" it inside the car), and not running out anywhere under the car. That doesn't leave much for possibilities, EXCEPT he says it runs very rough when first starting up cold. I think it's filling a cylinder(s) with coolant when sitting and then when he starts it, it either pushes it back into the water jacket or out the exhaust or a little of both. That would explain the rough running.