My lovely wife and I must soon replace our venerable old water heater -- it's 35 years old with an expected life of 10 years, it's plumbed illegally, the plumber who fixed the pressure valve last year was amazed it wasn't flooding the basement yet, and -- this is the kicker -- it used to last through 3 showers and now barely makes it through one.

A friend suggested I look into one of those tankless heaters -- does anybody have any experience with those? Are they good? Bad? Indifferent? In these days of skyrocketing energy costs, is it a better "deal" than keeping a huge mass of water hot 24/7?

Thoughs appreciated.