I think the reason some local codes say propane should not be below grade is because propane is heavier than air. Unlike natural gas that is lighter than air. So if you have propane leak, the basement will fill will gas, and there is no easy way to ventilate the gas out of the basement. Moreover you can walk into the basement and never smell the gas because it hovers close to the floor. This is especially dangerous situation.
A gas sensor should be installed close to the floor to warn of problems. Call gas supplier for local information, but ask general questions. If you are out of code, they could possibly red-tag the furnace and water heater and then you go without heat and hot water until installation passes inspection (this would be worst-case scenario, but I worked for guy years ago that got red-tagged in the middle of a job for failing to pull a permit – the guy across the street was a plumber and reported the violation).
About the hybrid: the heat exchanger removes warm air from room and pumps cool air back into same room. I have read that this type of heater is good for naturally warm climates such as Florida/ Texas etc. But I cannot speak for everybody’s experience. That being said, you should look at the parts diagram and ask who will carry parts in year 9, and how much repairs will cost.
I tend to be a pessimist about things breaking, and prefer simple tank-type electric water heater because of my disposition rather than profound energy calculations. However ordinary tank-type electric water heaters are very reliable and inexpensive to fix. In this sense, tank-type electric heater is good for people who do not want DIY projects.
About warranty. Tanks with longer warranty have larger anode rod, or two anode rods. And you pay more for the longer warranty product.
There was illuminating post about warranties made a couple days ago. All tanks (gas-electric) have 1 year parts and labor. This applies to 6-9-12-15 year warranties. After the 1 year warranty period ends, the pro-rate starts. The math showed it was probably better to buy cheaper 6-year tank, and then inspect/replace anode rods each 1-3 years. Anode are only $50 for example. While longer-warranty tank can cost $300-500 more than typical 6-year tank. So how does this information factor with a lack of desire for do-it-yourself projects? Probably better to pay for longer warranty tank, than hire somebody to inspect anode rod every 1-3 years.