Irving - I like tankless water heaters. Our water temperature is cold here in Colorado, so I would not recommend anything less than 199,xxx btu. If you go smaller than that the rate of flow to the faucets and etc could be limited. They are very expensive when done correctly(proper gas line size, venting, isolation valves etc) and require yearly maintenance. The flushing of the heat exchanger is easy if the tank was properly installed and can be done by the home owner. The last tankless I sold I charged $4200. This made sense to him because his house was built with high efficiency equipment and couldn't go with a minimum efficiency tank(he had plastic pvc venting not metal). So the high efficiency ranked water heater was around $2600 and would last probably 8-10 years, the tankless was $4200 and should last 20.
As far as catastrophic failure, I've never seen one do any damage like a tank water heater when they go.