This has been discussed a few times, in my humble opinion, you need to check with the tankless heater supplier to see IF it will actually work with your recirculating pump, as I recall there were some people reporting problems with this type of installation. If the tankless will not work, as I recall your warm up time (for the shower) will be longer as you have the warm up time of the tankless heater and the normal time for the piping.
Personally I would just change out the existing hot water tank and save some money.
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Pennsylvania, for 60+ years, most recently, Allentown, now TV. 
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