My 1951 California house is only 1650 ft2 but has one water heater in the laundry room (also serves kitchen and a half-bath); another that serves 2 baths by bedrooms is in a patio enclosed by the house on 3 sides - adding a curtain wall on 1 side would give me a 200 ft2 family room. My goal is to remove those two and install one outside the house that will serve both systems. Tankless not an option; gas service too small. A couple of questions:

1) Garage is separate from house - not workable location for water heater. If I build an enclosure attached to an exterior wall, is that acceptable?

2) The only workable exterior locations are along the eaves of the house. How high above eave must vent extend? Must the vent pass through the roof or can I make a bracket to support the vent outside the gutter?

3) The new location will have to be at the end of one system or the other, making the run to the other system fairly far (about 80 feet to the furthest faucet). Am I right guessing that if I insulate well, a recirculating system on a timer with one tank isn't likely to use much more gas than the existing system with 2 tanks?

3) My water is very hard and the system 65 years old, so I am considering replacing all the hot water pipe accessible from the crawl space (but not in walls up to fixtures). I consider myself a moderately competent DIYer, but am inclined to use galvanized like the existing. If I decide to hitch up my pants and dive in, which is more likely to be successful for a newbie - PEX or soldering copper?

4) I've got DIYer type books but they don't really address all this. Any suggestions of a resource - or should I just keep coming back here to the experts?

Thanks.

Regardless of how well you insulate the system it will ALWAYS be more expensive to operate than two individual heaters.

If the part of California you are in does not experience regular freezing you could probably get a sheet metal water heater enclosure for cheaper than you could build your own. Use double wall for the vent above it and offset around the eaves, all this stuff and a bracket are off the shelf items. You can use sinle wall vent inside the enclosure.

Mixing galvanized and copper often leads to trouble, you can use dielectric fittings or, better, brass nipples at least 6" long but mixing metals is can led to electrolysis. With dielectric fittings or PEX you need to be sure you do not compromise your electrical ground. Very few plumbers would use galvanized because it is a lot more work and requires dragging a bulky threading machine around. No "wham, bam, thank you mam" there. If your gal pipe is that old and still working the water can't be too horrible. If I wasn't such an old fart and it was my house I would probably use galvanized, even though I don't think steel pipe is as good as it used to be. I will probably take much abuse from other posters for this suggestion.

80 feet is a long run for hot water. a recirc system may even be required in CA for that long?
yeah a timer is a good idea and you can look into a motion sensor as well.
as for the chimney, yes you can use b-vent outside and attach it to the side of the house/gutter as long as you meet the clearance requirements.
as for the piping below, pex is the only way to go.. especially if you are running a recirc line of about 80 feet back to the heater.
tom, it took me a while to get used to pex piping. i always ran copper and was very fussy about it all looking plumb and level and srtaight. now i run pex and it looks like spaghetti.

Tom.....Can you elaborate about your gas service situation? It would be odd, if the service from the street could not support another 200k/btus for a decent tankless. It might require replacing the meter for one with a higher capacity, and the tankless could be installed outside.