As a plumber and plumbing estimator, I deal with a lot of the points that have been raised on this thread. Some of the issues to keep in mind when changing from a tank style water heater to a tankless water heater are-
-Sizing. To be satisfied with the system, it's gotta be sized properly. As a general guideline, the average size residential tankless water heater will provide between 5 and 9 gpm at a 70 degree temp rise. In my area the average ground water temp is 48-50 degrees (colder groundwater temps mean less gpm of available hot water). Starting with that knowledge I can calculate that I can get 5-9gpm of 120 (the code maximum allowable residential temp in my State). The EPA mandates (wink, wink)that shower heads are limited to 2.5 gpm. The average person showers with mix of 1 part cold to 3 parts hot, manually adjusted by the user at the shower valve. So, a 5 gpm tankless WH will provide enough volume for approx 3 standard showers at one time with practically nothing left over. Depending on the occupancy of the house and the amount of hot water needed a house might require a large tankless WH or 2 smaller units. The lower available gpm from tankless style water heaters is probably what Redneck was thinking of when he mentioned that they may not work for filling a whirlpool since most whirlpool have high flow valves that run somewhere between 10 and 20 gpm, depending on individual model. A tankless will do it, but either may not fill the tub as fast or may not provide hot enough water at the higher flow rate-different tankless WH manufacturers have different ways of controlling the outgoing temp or flow rate.
-Venting. Keep in mind that some units use stainless piping (usually just for the exhaust side) and some, like the Rinnai, use a proprietary direct vent with a pipe within a pipe. Many of the newer designs are able to be vented with solid core schedule 40 PVC pipe.
-Gas piping. The typical household tank style water heater usually has a 1/2" gas, connection whereas even the smaller tankless WHs typically require a minimum of a 3/4" gas connection and some require as large as a 1" gas supply. Make sure that your gas piping in the house and the line to the heater itself is sized for this additional demand. We often have to retrofit the gas supply when switching a customer over from a tank to a tankless style WH.
-Hard water. Hard water can create a clogging problem for many tankless WH heat exchanger designs. In order to heat the water quickly as it passes through the heat exchanger of the tankless WH, there has to be a lot of surface area exposed to the hot fuel gases. This is typically done with dozens of very small water passages in the heat exchanger and these small passages can become clogged as the quickly heated water releases molecules of minerals like calcium and lime. The Eternal tankless WH is supposed to be capable of using water up to 12 grains of hardness. I'm unsure if there are any other tankless makes with the same capability.
We strongly recommend that folks with hard water use a softener in conjunction with a tankless water heater and also get the tankless heat exchanger flushed annually.
-Avoid waiting for hot water at distant fixtures with a recirculating line. Some of the tankless models out there have a small built in tank that allows the use of a recirculating line to keep the hot water main up to temp, which means no or very little waiting for hot water. Eternal and Navien are 2 that I'm familiar with that have this feature. I haven't installed a Rinnai in the last couple years, but at that time a small separate electric water heater and pump were required to have a recirculating line.
I'm seriously considering going tankless when our electric tank water heater kicks the can. Probably the only things that might stop me would be the initial cost and the fact that I try to avoid adding to our propane use.
That's about all I can think of for now.
