Water water everywhere...

Well it appears that the puddle inside our furnace/air conditioner is actually being caused by a small leak in the water heater. I looks as if my Saturday is going to be spent replacing a water heater. We've done a little bit of research found that a tankless water heater would cost close to $1000 not counting installation. If we just replace what we have it'll be around $400 without installation. Consumer reports that most houses save $40 to $50 a year on gas costs with a tankless water heater. That means that it'll be 12 to 15 years before the additional cost of a tankless heater is offset by the savings. So we'll probably just install a traditional water heater.
I've had good experiences and bad experiences with tankless heaters. The good experiences were in Japan where the homes were designed specifically around tankless heaters. We had a heater directly over the kitchen sink and it was only about 10' of pipe from there through the wall to the shower. So we only had to let the water run for a few seconds before the hot stuff came out of the shower.
On the flip side of that a family member put a tankless heater in a house that was previously designed around a traditional heater and it takes 5 to 10 minutes before even tepid water makes its way back to the shower. More than likely the water gets relatively hot at the source but just cools down too much on the long trip. In this situation, I'd be willing to bet that any savings from not having a tank are quickly lost in extra water costs while you're waiting for the water to get hot.
Two years ago I went down to Florida to help people in Orlando area put tarps on their roof after being barraged by three hurricanes in a row. Since we were having to work around their solar water heating panels I took the time to ask the home owners about them. Being a hippy at heart the idea had always appealed to me. I was glad to have the chance to ask some first hand users what they thought about the technology. For the most part they all seemed to enjoy it. The biggest complaint they had was that is was too hot in the summer and just that it was hard to regulate.
All of these experiences have me considering that the best option was probably a hybrid of all three solutions. You could have solar system that was used to preheat a storage tank. Then you could have an inline a.k.a. tankless heater after that. This would basically just be a regulator. When the water entering it was too cold it'd give it a little boost. Then after that you could have a very small reserve tank that would do nothing more than provide the first couple gallons of hot water so you didn't waste water waiting for the other systems to kick in. If I built something like this it'd probably be at least twice that cost of any one of the individual solutions. But it'd be fun. Truth be told it be the financial planner, Victoria, who decides what I have to build tomorrow and not the tinkerer experimenter, me.