The regulator and tank connection should hook up to a grill tank no problem.The regulator is sized to the appliance, not to the container it is connected to. As long as this is a conventional water heater of about 35,000 btu's it will work fine. That is about the same btu's as a grill. But if you have a tankless heater it wont work. Those heaters are often 150,000 or even larger. A 20lb cylinder will not run that.
The connection will be a left hand thread with a tapered connection. DO NOT USE TEFLON or any other type of sealant on that connection. It is not necessary and can cause problems with fuel flow if it gets into the orifice or goes downstream to the appliance gas valve.
Make sure you ue a 50/50 solution of dish soap and water to leak check your connections.
One last thing. You will need to open the cylinder valve very slowly and only open it slightly for a few seconds. Then you can open it all the way and "backseat" the valve. There is an excess flow valve in the cylinder valve that could activate prematurely if you open the valve too quickly. This will make the appliance very hard to light and you will have a very low flame if any at all.
I hope this helps. Good luck with it!