LJD, you might want to check your heater, it's probably undersized; just like most anyone else that has or had a tankless heater and is complaining about cold or cool water.
My tankless heater is set at 120°F and will burn you if cold water isn't introduced. And yes my water is plenty cold coming out of the well, through a whole house filter and a water softener. My heater rise with a 2.5GPM (using your example) is about 120°F. Check the link. Plenty hot enough to shower and and run the dishwasher at the same time.
Efficiency, is much better than having an an oil fired boiler kicking on in the middle of summer with nobody using hot water; only because it dropped down.
I burned about 250 gallons ($2.18 gal) of propane for a household of two, for the year, just for hot water. I would have burned around 500-550 gallons ($3.50 gal) of heating oil for the same hot water only. The house is heated by a wood stove. Which is cheaper for hot water? A tank water heater would be more efficient than my boiler for domestic hot water, but not nearly as efficient as the tankless heater.
Tankless was also energy star rated so I could get a tax credit with it.
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