Re: Tank vs tankless. I have a tankless at my house now and I save over $600/year (at least) over the old tank water heater. That and as long as there is gas we can run hot water all day long. I can run the dishwasher and take a shower and still get hot water from the sink. It's awesome!
Are you accounting for the extra water that you use with a tankless? (Due to the longer time to get hot water from the heater to the tap). It may or may not be a lot depending on usage, but it's not zero.
If I thought I could save $600 per year with a tankless heater I'd get one installed. It's hard to run the numbers, the biggest gas charge by far is our heating. The last monthly bill before we turned the heat on, the gas part was just under $32, and that includes cooking. I know it will take more to keep the water hot during the winter because the garage is colder, but I still don't see $600 there. Tank water heaters are becoming more efficient, so the fuel savings might not be as much.
I'm really not trying to argue against tankless, I'm just trying to point out some of the things that need to be considered for different applications. It's not a one size fits all solution.
Oh, and I can run the dishwasher and take a shower too, and still get hot water from the sink. Maybe the real problem was your old heater was inefficient and under sized.