What about a 3/4 high wall with glass above, frosted or otherwise? I'd say yes to a glass door, too, pocket or otherwise with obscuring glass. If you did this, could you cover just the lower portion of the window for privacy and leave the upper part uncovered? This is my bathroom pocket door and it lets through a good deal of light.

Here's my take: 1. It may be getting to the end of its useful life, but it sounds like there is nothing wrong or malfunctioning at the moment. My water heater is 17 years old and is still functioning just fine, although I realize it's living on borrowed time. So when it fails, I'm ready to replace it. 2. Your 12 year old water heater will already have a good level of insulation, and, since a new one would be running on electricity also, a new tank is unlikely to be much more efficient. Recent efficiency gains in water heater technology mainly have to do with tanks that have combustion systems, like natural gas. So I doubt that you will see big energy savings from switching to a "more efficient" unit...perhaps a couple of percent, if that. If you switch to a smaller tank, there will be some savings because a smaller tank has less surface area to transfer heat, but the savings will not knock your socks off in your climate. 3. What mainly drives costs is that the groundwater coming in to the water tank must be heated from its inlet temperature to about 120 degrees F. In places that get cold in the winter, that inlet temperature can be below 40 degrees F, which means that the water temp must be increased by at least 80 degrees F; however, you are in the warmest part of the U.S. and your groundwater is close to 80 degrees F already, which means that you only need to use about half as much energy to get the water up to 120 degrees F. And, since your water heater is located inside the living space, the standby losses will be less than someone like me who lives in a place that can approach freezing in winter and has a water heater in an unheated space. 4. It's true that water heaters can lose efficiency over time, particularly if you have hard water and you get mineral scaling building up on the heating elements. However, it's quite simple to replace the heating elements and rejuvenate your tank for not much money: Heating element replacement 5. There's nothing wrong with having an 80 gallon water heater for two people. There are only two of us in my house and ours is 75 gallons. And when two of us take showers, one after the other, we start to run out of hot water. What I recommend is you look at what the energy efficiency label says on your existing tank about annual operating costs, and compare it to the label on a couple of possible replacement tanks. Then compare the amount of annual savings to the total cost of replacing your existing tank now to see how many years (or decades) it will take to break even. I'm not saying that your plumber is lying to you, but he does have a financial incentive to convince you that there will be big savings to switch out your tank soon. My advice is to wait until the old tank fails and and then get a new, efficient one. How big will depend on your lifestyle, and how long your shower runs daily. If you never run out of hot water, you could certainly downsize some, but don't end up decreasing it by a huge amount or you may end up unhappy.

I agree with Cpartist"s layout and like moving the closet over as suggested by D M so that bedroom 3 has easier access to the bathroom. Do you have room to have the toilet face the tub and add a linen cabinet next to the toilet? How wide is the tub toilet area?

I honestly don't understand the gas chamber mantra that gets tossed around here. We are physiologically designed to be more sensitive to and more disgusted by the waste of other people than our own. So anytime a person is forced to occupy a space that recently contained someone else's waste it is unpleasant for them. The best way to make it more pleasant is to limit the time any person might have to spend in a room where someone else's waste has recently been. The easiest ways to do that is to limit the purposes of the room used for waste or schedule waste activities so there is no overlap. Increasing the space to dilute the odors doesn't really work that well. If you don't believe me, take a walk near a cow pasture.