Argument: Oxygen is replaced by Carbon dioxide. So, there is the same amount of gas added than taken away. Therefore, heat alone most be responsible for the water level change.
Source of the Error: A simplified and wrong chemical equation is used, which does not take into account the quantitative changes. The chemical equation has to be balanced correctly. It is not true that each oxygen molecule is replaced by one carbon dioxide molecule during the burning process; two oxygen molecules result in one carbon dioxide molecule and two water molecules (which condense). Remember oxygen is present in the air as a diatomic molecule. [A reader clarifies the water condensation in an email to me as follows: If the experiment were done with the sealing fluid able to support a temperature greater than 212 F and the whole system held above this temperature then the water product of combustion would remain gaseous and the pressure within the vessel would increase as a result of three gaseous molecules for every two prior to combustion and the sealing fluid would be pushed out.]