Valid points, but -
Water ingestion into the engine is a potential problem with all W/C engines, probably much more so due to head gaskets etc. I would expect water vapour to be blown out of the tailpipe in any case if it were to fail.
Exhaust gas cooling will down the performance slightly, but then you have exactly the same problem with normal heat exchangers.
In winter daily driving, it's pretty unlikely you'll be wanting to use every last HP available (beetle with 2L plus in my case)
Plus, if it's a stainless system, you can drain the coolant in summer, so that doesn't have to be a problem.
Somebody on here (a couple of years ago) posted up that he got toastie warm car heat using only 1 W/C stainless exchanger, though we'll have to see about that. I intend to try this experiment, but it will be 12 months or more before the car sees the road, so don't hold your breath. I will fully document it online when I do it though, so the results will be available.
Water cooled heat exchanger is vunerable, yes. Less so than standard heat exchangers though, as I intend to make the outer pipe not too much larger than the inner exhaust pipe, to reduce coolant volume and speed up warm up time. My car isn't a weedhugger, and I run a towbar that doubles as a sump guard. The associated pipes, valves and pump will make a more complex system, and hence more fault liability but it's only a heater and the worst that could happen is that you will have a cold car until you can fix it. It will certainly be a darn sight less complex than an eberspacher.
Would also be intresting to try it with a water cooled oil cooler, but I think there's a lot more heat available to be extracted via one of the exhaust pipes, and it will heat a lot sooner, which is when you need the heat on a cold morning, - ASAP.
Practical testing is the way forward IMHO.
There's 3 reasons I don't want to fit regular heat exchangers.
1 - They're too restrictive for a big motor and the "big bore" ones don't have proper fins, so they don't heat very well.
2 - I want to use the extra air that would normally go to the heaters, to help cool the big engine.
3 - I'm a born tinkerer and can't afford a castle in Transylvania yet. VW body parts are readily available though, Igor.
Dave.