1) I'm assuming you're looking at a natural gas powered tankless heater because using an electric tankless heater would just increase your utility bill. Seems obvious, but I didn't see it in my skim of the thread so I wanted to point it out.
2) My parents' house has a tankless heater (Rheem). It turns on with flow rate, but also somehow regulates output temperature. IE with very cold input water and a very high flow rate it will run at full power and not achieve its target output temperature, but at lower flow rate/higher input temperature it will cut back the flame so that the output temperature stops going up. What this means for you is that it doesn't much matter how hot the return water from the tank is.
3) There are plenty of pumps you could use for this, and use that to trigger your on/off.
4) I suspect you'll want to operate with a reservoir like a trash can that you top off periodically, or with a big accumulator. If you totally seal the system and remove all air bubbles you'll have some pipe bursting pressure spikes when you warm it up.
5) Assuming you haven't already, I would put a lot of concern towards how you regulate it. I've seen a lot of cases where a poor control system cooked a tank. Too many times have I seen a temperature probe that fell out of the tank, stayed in but the ATO failed so it read air temperature, temperature probe in the display but heater in the sump and a failed return pump decoupled them, etc. Always a good idea, but more so as your heater gains the ability to cook the tank quickly rather than slowly.
6) Look into storage rules so that if you don't run the heaters all summer you don't end up with pinhole leaks in your heater. Some HXs have an upper period of time they want to be stagnant for. Hopefully that's covered for this application, but I've seen it in other HX situations so figured I'd mention it.
7) You may be able to cut the heater by cutting the power to it. This could be useful as you could cut the gas power before cutting the pump therefore not be constantly shutting down the system with the whole system hot. If you're only running the heater in the winter it won't matter as waste heat will warm your home, but if you plan to run a tank heater during parts of the year you are also running home A/C this would help.
8) Remember that insulating the tank (and using thin lids to cut down on evaporation) can make a huge difference in your heating (and chilling) needs. Holding temperature while evaporating a gallon of water per day requires adding 107 continuous watts of power. Evaporating 5 gpd is 535 watts continuously. Helpful in the summer if you need to chill the tank, but less so in the winter when it's an expensive way to add humidity to the air.
9) You could instead pull from your home's main hot water heater. You can get purpose built pumps designed to run hot water at pressure. From a failure perspective though I'd rather have a closed system at no real pressure get a leak than have a pressurized system with effectively infinite volume behind it spring a leak.
