Room sealed means that both intake and exhaust are brought in from outside. Your clearance requirements are pretty minimal (and the size of the room is not an issue, because make-up air is coming from outside). The "separate room" and room size requirements are typically due to the volume of air required for combustion and the method used by the heater to obtain that air. If a large BTU burner is in too small (by volume) a room, theoretically, it could consume all of the oxygen in the room.
Most local code agents are fairly unfamiliar with tankless heaters (my experience so far anyway). They will typically default to whatever the manufacturer recommends in the installation manual.
All that being said, if you are looking at LP (Propane) units rather than NG, I'd shy away from the Bosch unit. I had one (also LP) for about 4 months and had constant problems with consistent firings, loud noises, steam flashing in the heat exchanger after shutdown (water would stop flowing and the burner would continue for another 10 seconds or so, flashing the water to steam and hammering the pipes throughout the whole house).
When I finally got through to the right people (NOT FACTORY REPS - who were worthless from a support standpoint) that had some knowledge and experience with LP tankless units, they had a pretty simple answer to my issues - replace the unit with one
designed for LP gas. According to the couple of propane places I spoke with, LP is a more "finicky" gas than NG when it comes to proper combustion, etc, and that using a unit designed originally for LP gas will result in better results than one designed for NG and "converted" to LP. They said the European units were designed for NG and often "converted" (due to the EU primarily using NG for the fuel source), while the Japanese units were designed for LP and "converted" for NG usage, since the Japanese have primarily LP gas for fuel.
So, after 4 months of bad luck with the Bosch (and several hundred $$$ in "factory-authorized representative" repairman visits attempting to fix the problems), they took back my unit on warranty and I replaced it with a Rinnai. After hooking up the Rinnai unit (I did all the installation - on both units - myself), the
very first time I turned it on, it worked exactly like it was supposed to. Nearly 8 months later, still no problems. Endless hot water is nice.
The Rinnai venting was much simpler to install as well - the intake is a PVC outer shell with the exhaust as a stainless steel inner pipe (like a double-ring in cross section), so you don't have to run two pipes in opposite directions like on the Bosch. I definitely recommend placing the unit on an outside wall - it makes installation of the ventwork much easier, and cheaper. The vent piping is expensive - the Bosch ventwork is roughly $80 for a 4' piece of pipe. I think the standard "kit" for vent and intake of the Bosch runs around $400. The Rinnai "kit" was around $200 or so. The Rinnai unit was more expensive (around $1000 instead of around $800 for the Bosch). Another cool "feature" on the Rinnai is the wired remote - you can install it away from the unit (mine is in the master bathroom closet) and control the water temperature and/or check status of the unit without having to go check the unit itself (mine is in the back corner of the basement).
Other considerations are gas line sizing - these puppies need a LOT of gas when they are operating. If installing in an existing home, you need to take a look at what your gas supply piping sizes (and lengths) are, and whether they will support a tankless unit without modification. In a new home, make sure you size the piping right up front (or let your plumber know your intentions). It is not uncommon for tankless units to require a full 1" gas line (especially for installations using the yellow flexible/corrugated gas lines, which are discouraged by ALL tankless makers). I ran 1" black iron and reduced to 3/4" right at the unit to make sure I had no issues (and to allow installation of a possible second unit for radiant floor heating in the master bathroom down the road).
Finally, consider installation of a recirculation loop on your hot water system to eliminate the "cold water sandwich" that is common with tankless water heaters. It is best to use a small tank heater (6 gallon or so) and run the recirculation loop through that small tank rather than recirculating through the actual tankless unit (which would make it run more often and pretty much kill the "effeciency" idea of tankless units). Rinnai has a good schematic in their user manual related to this in some of their documentation (file attached - the first "schematic" is the one to use).
Oh, and one last thing - use the Isolator EXP valves for your water connections. They make life so much easier when connecting the water than any other option - especially since the tankless unit requires the pressure relief valve to be installed externally (rather than its own tap on the side/top of a standard water heater), but upstream of the shutoff valve. The EXP valves also have purge/drain taps built in as well, which is really nice.
Edit: Some of my prices may be off a bit - I was buying my stuff nearly 12 months ago, and all of my purchases are made through a wholesale supplier that the company I work for uses for all of our industrial and commercial piping/plumbing supply (i.e. BIG discounts). But otherwise, the advice is based on my personal (and to some extent painful) experiences while designing/building my own home.
