Max,

I still have and use a Paloma tankless water heater ... (just got back from a few weeks sailing in the San Juans PNW - still working superbly) we love it ... circa 1983 ... although I had it rebuilt before I re-commissioned it (previous owner had disconnected it) ...

I was ready to toss it but a dock-mate convinced me they were great (he had one and was a live-aboard for 10 or so years) I was able to locate a certified technician locally ... who basically showed me what went wrong with it and the likely reason the previous owner had disconnected it ...

Ours is mounted on the bulkhead in the forward berth, with a direct vent up and out (original still has never leaked!) ... although we are careful and never leave the pilot or gas to it on unless in use ... a little paranoia is a good thing when it comes to propane IMHO...

I don't see the same one as ours in this link
http://www.palomastore.com/?gclid=CPfw7dvirKsCFUwZQgodNxsW7w but apparently they are still in business.

For me it made sense as I already had a dedicated propane locker venting overboard with 2 20# tanks that serves the oven/cooktop and the H20 heater - it does get scolding hot very quickly but it is adjustable (max temp) it doesn't seem to use much propane but then again were not live-aboards but even when I used to use the boat 80 days a year we rarely had to fill both tanks but once a year ...

The usual NO's your milage may vary

~ Nick