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We had a propane tankless water heater installed in our new home in 2004. It was a Bosch (I believe), around $2000. Worked great, always had domestic hot water. And, as a bonus, it also heater the floors (via radiant hot water) in the bathrooms.
But, since it was propane, the yearly maintenance costs were relatively high (couple hundred bucks per year). I'd assume the same goes for natural gas. And, if it's propane or NG powered, it HAS to go on an outside wall, for venting.
As far as the hot water circ goes: do it, if your furthest fixture is more than about 30 feet from the hot water appliance. Our kitchen sink was about 50 feet away, and it took 1-2 minutes for nice hot water to arrive.
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