I'm in the same boat regarding not using the water heater much at all. I do test it each year to make sure it's functioning, but don't really use it. Never really thought of going the instant hot water route as I agree that the current water heater does a fine job when needed. Most trips i run with it empty so not carrying the weight. The only need I have for hot water is doing the dishes so I just heat up some water in a pot on the stove and dump it in the sink. Heats up quick and only the amount I need, not six gallons.
I have heard of others changing to instant hot water so I would assume size wise it should fit just fine in the same spot your current heater is.
