My parents had a problem with mildew because of the heat. A long slimey string of goo would come out of the shower head.

We have an electric tankless - a Stiebel Eltron - had it installed a couple years ago and I would never, never go back to the old way. It's fantastic. We did have to upgrade our electric but were doing that anyway as we were also doing a kitchen Reno and seriously upgrading appliances (our home was built in 1957 and the wiring wasn't great). Runs beautifully...as long as the electricity isn't out of course. But our neighborhood very rarely loses power so not been an issue for us.

The upgrade the mains outside your house is free, Washington Gas will pay a contractor to do it, the plumber installing your tankless will size and install the new gas line inside your house, he will charge about $800 extra for this. Depending on the length and complexity of the run.

If you have the floor space, I think that a hybrid water heater [that has a small tank to provide instant hot water and then switches to direct (tankless) heating] offers very good performance and efficiency at similar cost to the tankless models. I was looking at a AO Smith Vertex http://www.hotwater.com/vertex/