First, I would drain and flush the existing tank before I did anything. I assume this is a commercial water heater due to it's size and as far as cost goes to remove and replace, it would be anywhere from $4000 and up, depending on where you live and how efficient you want the new one to be. How many bathrooms do you have in your home? I would venture to say you could downsize since the newer ones are more efficient. Also, where is the heater located in the garage, basement, etc. and is your home multiple stories? Mark
In your situation, you might want to consider 2 199,000 BTU tankless water heaters installed in series depending on your demands. 2 tankless run about $1000 each plus installation of around $1500+ depending on demographics and location of the water heater.
the house has 7 bathrooms and is two stories. i think with the age of the unit, i should probably invest any money into switching it out. i have tankless at my office and its slow in terms of getting hot water (or so that one is). does this information alter your response?
The venting is the only issue that I can see being 2 stories. With 7 bathrooms, I assume you have a hot water recirculating pump? 2 tankless would be much more efficient in terms of gas use. I would drain and flush the existing one first before I did anything. You may just have sediment in your tank decreasing the hot water volume and efficiency of the heater. Tankless heaters have to be able to accept a recirculating pump if you have one. Mark