** The purpose would be to have the hot water circulate by convection when the taps are closed, thereby providing "instant-on hot" when either of the faucets are opened. **
I don't know if you want to install a unit designed to do exactly that but one is already on the market which can be seen at the link below.
LINK > ChilipepperŽ Appliance
I don't have answers for your other questions.
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