Help replacing old Atwood Water Heater with New Atwood

You can do as you suggest- the only thing you will not be able to do is run the water heater on electric only- only gas, or gas/electric.
If it is going to be impossible to pull a new wire to the original switch, you could mount the new switch close to the water heater and feed it with the old line. Original switch would be a "master" (I would then wire the light to simply indicate "on").