[JRMichler]

I had a similar problem. Then I thought it through and realized that the wash machine and showers were "big" users where flushing the cold water out of the line was a small percentage of the total water. The "little" user was the kitchen sink where we draw small amounts of hot water many times per day.

We went with one 40 gallon hot water heater that feeds everything. The kitchen sink has a 2 gallon water heater under the sink. The 2 gallon heater means that we waste about 1/2 pint of water before the hot water comes through. After about 1/2 gallon of hot water, the hot water from the water heater gets there. It works very well.

I had to replace all the plumbing in my first house. I ran 3/8" copper directly from the water heater to the kitchen sink, and to the bathroom faucet. And larger lines to the shower and to the wash machine. It took about 1 pint of water before the faucets got hot, and pressure drop was minimal.

Remember that tankless heaters have a minimum flow rate, and the temperature is a function of both flow rate and incoming water temperature.