dyno - what do you mean by not operationally cost effective? As a general rule electric heater are much more efficient in terms of heat produced from a given amount of energy input. Now your cost at the end of the day may or may not be higher - really depends on the cost of a given energy source in your area. Here in the south where there is often access to cheap hydro electric power the electric kicks gas up and down the street. The opposite is true in New England where expensive coal and oil fired elect. plants dominate. Just look at the energy efficiency ratings of the heters. Gas are typically in the 70-80% range and electric in the 90%. This doesn't mean there aren't gas units out there that produce 94-95% efficiency ratings or electric ones that stink with only a 75% rating.

Two things to remember about the TINY heat pump on top of the hot water heater. It only removes heat from the room to replace the BTUs that are removed from the space via hot water going out the pipe. Example. You go on vacation for a week. ZERO net heat is removed from the room. In other words, heat transfers from the stagnate hot water back into the room and then the heater kicks in and removes it from the space and transfers it back into the water... not free, but very inexpensive and absolutely no need for the home's heating plant to make up any heat - as I said, no NET heat loss or gain. Now take the case where you take a hot shower upstairs. ANY heat removed from the basement by the hot water piping remains inside the conditioned household envelope except that which exits via the plumbing drain in the shower. Also, presumably cold replacement water from the street is brought into the envelope to replace that drained water. I have NEVER seen a change in my basement temperature due to the heat pump hot water heater because my subterranean basement is simply a massive heat sink that resists temperature change big time. While I do remove like a pint of water from the air per day in the summer, I have never been able to measure a change in humidity - just the nuisance of having to deal with disposing of the condensate. You're creating an apples and oranges situation when you compare heating with gas and "pumping heat" from the room into the water. With your gas heater, the heat that 'flows' back into the room is not recycled back into the hot water heater, rather it is "replenished" by bring NG into the room and igniting it in a non-recoverable manner. The net effect is to heat the room while you are on vacation... as I suggested there is ZERO net effect with the heat pump hot water heater in my example. I have documented in this forum that my electrical savings for my family of two is approximately $40 per month due to the hot water heater as compared to the electric hot water heater I previously owned. I also have tried, with mixed result, to explain that taking the basement as a system and drawing a diagram show heat in and heat out of that system is helpful. Too many folks that have never owned one of these and have made false assumptions have reached conclusions that are absolute nonsense. My unit is a GE model... I had a compressor leak after 11 months that was repaired under warranty. Reportedly this problem was not an isolated case... and the Model was discontinued. If you have the time, the final math problem (actually rather simple) is to assume some water usage and calculate the enthalpy rise in the heater times the gallons and determine how much heat is being removed from the basement... that is the amount of heat that your heat pump would need to replace in the basement to maintain equilibrium. If I were the OP, I suspect I would opt for the Gas heater because the response time is faster, because it is quieter, and because he will not have to mess with disposing of a pint of water every day during the summer. But, I suspect that you need to caution the OP that his heater is heating the inside of the house during cooling season. :-) I played loose with my terminology re Heat Transfer in the above in order to attempt to better communicate the concepts - by background and education I am capable of using proper terms and terminology, but choose this approach.

Look at the cost benefit of going tankless, the cost will be much higher and payback may be years coming. May need a larger gas line, will need a new vent stack, etc. For the two of us the cost for tankless was not justified. I installed a 50 Gallon Bradford White, the tank cost was approximately $400. Normally with labor in the area it costs around $800 to install. Power vents not normally used where I reside. Guess with power vent cost to install $1000 assuming electrical is near. Tankless quotes here are between $3000 to $4000. Most gas lines need to be changed to accommodate gas volume requirements and the vent needs to be changed to handle the increased heat. Not a fan of Sears or their water heaters, Bradford White was rated the best by Consumers Reports. I am very satisfied with Bradford White. Looks like turning on and off reset the blower. My two cents.

"I wonder if a GFI breaker might be less prone to tripping..." no it wouldn't. as for "ditching the GFI" which they never should have told you in the first place... again, under the 2008 code in unfinished areas (basement, or garages) all receptacles must be GFI protected. Yes even garage door opener outlets must be GFI protected. The single device exception no longer applies under the new code. What I'm getting at, is you can do whatever you want, however if you want to sell the house or whatever I recommend you have it up to code.