Welcome to the forum! My 2007 T40C also had the Mercedes engine and since it was a chassis made in late 2006 by Freightliner, it did not require the DEF like later units did. It proved to be a very good engine and running gear with the Allison transmission...and achieved reasonable fuel efficiency even when towing.
I have a somewhat different opinion about water heaters, since I lived in my coach full time and kept it in an RV park slip most of the time. The water heater is a 10 gallon unit and has fairly rapid recovery -- plus it has both electric and gas hating elements. When on shore power, it is much more cost effective to use electric heat for water, and you don't need to go fill the coach's propane tank nearly as often. I ran about 4 or five loads of laundry a week on my Saturday off, and never had any shortage of hot water since the heater recovered faster than the washer finished a load.
If you do a lot of dry camping, or if you only use your coach for "outings" and travel by a propane refill station regularly, then using gas to heat water is a personal choice -- I am not aware of any tankless water heaters that use other fuels.
Anything you choose to do to your coach is your decision of course, and there are many enhancements and custom modifications on RV units in this Class A Diesel Pusher group as you will see by reading the archives here...
Enjoy your RV!!
2007 Tour Master T40C
Acura MDX toad
"It takes a great deal of time to recover from any improvement..."