Hmm, maybe i should flag myself on my post just to be fair.
This page sort of summarizes common problems with the tankless systems.
http://www.airmakers.ca/water_heaters.phpSome issues are blown out of proportion, but two common things i have noted from many reviews is as you describe, takes awhile to get the hot water flowing and secondly, you can get hot/cold water sandwiched during short uses of the hot water tap.
The tankless designs need to be run continuously to turn on and heat water. If a person were shaving and just turning on the tap every minute for a few seconds, then by the time the hot water in the line is drained, you would have to put the tap on full until hot water came out again.
I think there may be some solutions to include a small tank with a tankless system. I have no interest in hooking up a localized heater near each sink.
Presently we have a large jacuzzi in our ensuite that we cannot fill with a 50 gallon hot water tank. It is unusable unless we get some other system.
I was wondering if a high performance tank might suffice, with a quick recharge rate.
http://www.johnwoodwaterheaters.com/EN/Commercial%20Products/Polaris-High-Efficiency-Gas.html
