The distance does not affect the temperature at the final point of use. Both tankless and storage tank heaters are equally affected by the length of plumbing between.

Put another way,
Tankless water heaters and normal storage tank water heaters do not supply instantaneous hot water.

There are 2 categories - electric and gas (natural gas or propane) based.

Gas tankless
If you select a gas based tankless like the Takagi TK3, the flue pipe has to be changed as the exhaust gasses are hotter than a normal gas powered storage heater.

There are condensing versions of tankless water heaters that can have pvc vent pipe.

Electric tankless
These apparently take longer to heat up.

Capacity considerations - tankless water heaters need to be correctly sized as the hot water is generated on demand. If the flow rate is too high, the water temperature at the destination use point(s) will be too low. This is not an immediately noticeable problem for most storage tank water heaters as there is a buffer of heated water to draw from.

However, the same issue is seen when the buffer is drawn down e.g. - extended showering with a 50 gallon electric heater .

When correctly sized, you would be able to supply most (if not all) usage points simultaneously.

It must be noted that tankless waters carry a premium over the standard storage tank models and plumbers may not be familiar with them and the installation requirements. Consequently, they will push storage tank models over tankless models.

Thank you davidtay. But I am not clear. When you say correctly sized, do you mean the flow rate? and is that something I could easily adjust? Also I am assuming it would be natural gas since the water heater would be gas. I know the plumber my contractor uses is certified green and considered a master plumber so it could just be my contractor's inexperience. I really don't want the huge water tank taking up room and would have to familiarize myself with more details. But then again, I don't know what problems people have had. Most I read seem to be satisfied with the tankless.

It means the max hot water flow rate, assuming all hot water outlets are turned on. The TK-3 for example supports up to 26 GPM for a water temp increase of 50 F.

You'd want to a tankless unit that can cope with the max output.

If you have propane delivered, you need the model built for propane.

Following is a link for a condensing "tankless".
http://www.navienamerica.com/PDS/ftp/NavienCondensingTankless/DownLoad_Brochure_Manual/NavienCodensing98_Brochure.pdf

There are a number of vendors, of which Takagi and Noritz are considered the best in terms of reliability.

I'm happy with my Takagi TK-3. Great reclaiming the space and fixing some things that weren't installed correctly in the first place (such as a 240V outlet mounted on a wooden support directly under the discharge valve).

No regrets.

Additional consideration: time to first hot water vs lower energy consumption. Tankless are efficient because heat on demand. This also means never run out of hot water. Drawback is that it does not turn on instantly. Tankless units allow a certain amount of cold water to pass thru to gauge how much heating is needed before start heating. Conventional hot water heaters supply instantly from a tank of existing hot water. Delay to full hot in a conventional system is the time needed to flush existing water out of line (volume of water in pipe between hot water heater and end faucet). The tankless unit adds the volume of water before the unit cranks up to full heat.

I have a Bosch dishwasher which is very efficient, but depends on incoming water being hot. While incoming water is heated, amount of heating can not compensate for too cold water in initial fill. Dishwasher relies on heating of dishes by hot water to dry dishes (not a true heated dry like most domestic models). This system has real problems if using either a tankless unit or having too big a volume of piping between the water heater and the dishwasher.

For most uses, difference in timing just means running water longer before it gets hot. Energy savings are greatest for water heaters which are used infrequently. e.g. a weekend vacation home saves a lot on tankless unit. A commercial restaurant would most likely use less energy with a tank since tanks heat more efficiently and water does not stay in tank long.

Finally on sizing: A lot of sizing charts show number of bathrooms etc. If you have a well, the limiting factor is often well flow rate. If the well flows at 3 gallons/minute max, then it gains nothing to size a tankless unit that can heat 5 gpm. Size on the lower of house flow rate or usage.

Thank you both for the info. I have been reading about Noritz on their website and of course they say the hot water is instantaneous which I wouldn't believe anyway. But as far as the dishwasher, I always run the water til it is hot before I turn on the dishwasher under normal circumstances. I have a whirlpool but with my renovation (this is a total gut job) I was looking to switch to the Bosch. But I would still think if you let the water get hot before turning it on, it wouldn't be a problem.

For me, it is really about the space a 50 gallon tank would take up which is part of the appeal of of the tankless. I see that as of 8/01/11, Noritz is coming out with a new one that is supposed to be .93 efficient and can use PVC piping to vent. Otherwise I am looking at the NR71 or NR66 since this is for a 2bedrm/2bath apt with laundry in unit and dishwasher as well, though I doubt 2 functions would be going at the same time.

Any comments appreciated.

Tankless heaters fire up when the flow exceeds a certain threshold. Min flow rate for the Noritz NRC98 is 0.5 gpm. Max is 7.5 to 9.8 gpm, depending on the temp differential between the desired output temp and the input temp.

So, yes the hot water output (at the heater output) is instantaneous when a hot water outlet is turned on at full blast.

If the hot water outlet is not fully closed / leaking at a very low rate, the heater will not turn on if the flow rate is below the threshold.

I have a Bosch dishwasher and have no problems with the usage of a tankless TK3. The dishwasher has an internal heating element that is connected to the pump and not exposed like other brands.

The Noritz NRC98 is a nice unit and should be more than sufficient (assuming a max flow rate per hot water outlet of 2.2 gpm and not more than 4 in use simultaneously) .

We are looking at installing a Navien tankless - any known reviews, bad or good about this brand?

Look on the plumbing forum. There are a couple of negatives & positives.

The installer will make all the difference.