How can I tell if pressure pump is bad or if I have water leak.

Make sure you do not have any excess air in the line. More than likely there is an air (vacuum) leak on your suction line.

The squealing sound generally comes from a circulator pump, if it has a drive coupling between motor and impeller housing there is an oil cup/or oil hole, add oil until it is full! If it is a cartridge style circulator you may have to replace it.

Sometimes air in a system will cause this squeal noise as well. Purging the air out of system may be required. If you need to know how to purge a system there is a good pdf file at this link for $8.95 The Basics of Purging Air
From your Forced Hot Water System
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Troubleshooting A Leaking Boiler
Relief Valve
Miller Furnace Books Repair

The Expansion tank is factory set to 12 psi and the only way to tell if it remains with 12 psi is to drop the system pressure to zero and check the tank with a pressure gauge. If water comes out the air valvestem when you apply the pressure gauge, the tank is bad, replace it! If there is less then 12 psi on the tank add air to 12 psi and open water valves back up to normal operating pressure. Usually the feed valve will automatically stop at the preset setting.If the boiler is leaking water out any relieve valve drains, the feed valve, relief valve and or expansion tank may need to be replaced.

Have you ever tried to pump water for a fountain... It is so tough and you need larger and larger pumps to get it to go 7 feet high to let's say 10 feet high. Having the on demand water heater in the attic dramatically drops it's pressure. It's best to feed it with a 1 inch or at least 3/4 inch pipe downstairs before it splits the hot and the cold to get the best pressure everywhere then the least pressure will be when it reaches the 2nd floor. but the heater won't cut out because the pressure it even greater downstairs.

Bad relief valve or too much pressure in the tank. Does water heater system have a pressure blotter tank that allows for expansion(an expansion tank)

Here are a few tings to look for:
When COLD WATER comes into the heater, it might cause sweating of the Cold water line, if the humidity is high in the house? This is usually in summer time only-- when the humidity inside the house is higher..

Another possible place, is the relief valve:
If you have a check valve or two in the system, that ends up trapping all the COLD water in the tank, as it goes thru its heating cycle, -- the Cold water expands, and has to be relieved-- Thus the relief valve will spit out a puddle of water keeping the pressure at a safe level.
(However-- usually the system has a drop pipe coming out of the relief valve-- so likely you would have said that the puddle was at the bottom of the drop pipe-- and you probably would have suspected it..)

However-- Do these suggestions give you some ideas of where the water puddle is coming from ?
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Mack B

The pressure tank psi may be too high. To set it you get the system to pressure up and stop then check that water pressure. Whatever that is, is what the tank should be set at. Too much air pressure and the water pressure will suddenly drop before the pump kicks in.
To set the tank properly turn off the pump, drain all water pressure, then set the air pressure in the tank to the same as the water pressure was. Turn it back on and check again.

Get ready to replace. I have been notified of this problem about 30 times and each time the water heater dropped its load within 10 days. I was always replacing water heaters.
BUT if it is the pressure valve that is leaking then that alone can be replaced. That prevents the heater from blowing up.

Sounds like a well fed system with a pressure tank that has lost its air charge. Check for a water tank with a tire pressure type stem fitting, should also have a pressure gauge. Most newer tanks have a rubber diaphram inside to keep the air and water from mixing, but a lot of older ones don't and the newer ones will develope a leak that will produce the simpoms you describe. Try adding a few pounds of air pressure to the top of the tank and check for leaks. Warning: Compressed air can escape explosivly if the tank is badly rusted out but if your water pressure goes to 50# without the tank leaking, it should be safe to add up to 25# of air. The air charges the water system and allows the pump to shut off until enough water is used to lower the pressure back to set points on the control switch. It's not a good idea to adjust the set points on the switch unless all parts in the system have been checked for safety to the new pressures.

Remove your hydronic pump and replace the flexible impeller coupling that couples the impeller blades to the pump motor. make sure you don't do this on a sat or, sunday (i hate house calls then) and, be sure you have a new pump housing gasket before you start the job. Also check the unit for loose pipe brackets

you need 15 lbs water press,bleed air from system, primary must be bad