I think the right person can get most anything to work if he or she tries hard enough... but if youre not doing the work yourself, this system may be a bit of a headscratcher to maintain... I love the idea of turffing the oil furnace, but a 12 gal water heater might have to work pretty hard to keep hot no.... do you have an idea of how much water your system might hold... a quick volume calculation would help you in determining the size of your water heater...
The flash heat tankless water heater is a great invention, but buddy have you priced them... and I dont know how they are to run, no doubt takes alot of electro to heat water on an instant basis like that, but I guess its better than heating a full tank eh...
I grew up in CT, as I recall theres lots of trees there, how come you dont go with wood...