With out looking at your water heater any advise on what the problem
might be is only a guess. however I do have experience with the
tankless water heaters.
When I built my new home in N.Florida I installed a tankless LP gas
water heater. Love it! Unlimited hot water and very cheep to run. I got
the 9.3 GPM heater becouse of the size of the house # of baths (3.5)
and dishwasher washer ect.I can shower have the kids run the bath
water and do laundry at the same time and have enough water. It was
expencive up front, 900.00, but the savings in the long run will pay
off. Also as a bonus, It is the size of a very small suitcase and
mounted on the outside of the house. No huge tank to store hot water
untill you might need it!
My mom bought a new house and had it set near by my home and first
thing we did was take out the tank style water heater and put in a 4
GPM electric tankless heater. this one was even smaller, cost less and
ave her a new closet to hang coats in. her Highest power bill this
summer was 80.00 in FL.!!!! unlimited hot water on demand! Tankless Is
the wat to go! I got both on Ebay!