Here are some pictures of our water heater installation. We went with the Excel America LPG vent-free water heater. I installed it in the anchor locker with a couple sheets of aluminum behind it as a heat shield.
We put another propane system in and used the forward deck box for the tank storage with the switch in the head.
The water heater operates based on water flow. Once the water pressure changes and water flows, then the heater attempts to ignite the gas, but if the gas isn't on, then the ignition continually clicks. I didn't want to burn up the ignition if somebody tries to use the hot water side of a faucet without turning on the propane system so I installed a water solenoid that I bought off EBay that opens when the gas solenoid opens.