We have a solar (parabolic vacuum pipes) water heater which provides 95% of our annual hot water needs, backed up by gas. The heat is stored in a layered and heavily insulated 300 liter tank. The water delivered to the tap isn't actually from the tank, but it's just fresh water heated instantly and on-demand through a heat exchanger which is part of the storage tank. No need to worry about stale hot water with such a system.

They are not closed loop, they just push some water from the hot water line back down the cold line, where it will wind up back in the water heater and be used. They are no more prone to disease than you existing system.