EPS has a higher fraction of closed cells than XPS, and is a preferable material for use in wet environments. When submerged it initially takes on water more rapidly than XPS due to the interstitial spaces between the macroscopic beads, but it pretty much stops at ~7-9% (retaining over 90% of it's R-value even when soaked) once those interstitial spaces are filled. The microscopic closed cell structures remain intact, and while they're semipermeable to water vapor, the surface tension of liquid water prevents rapid adsorption into the interior of the cells. While XPS takes moisture on more slowly, it dries MUCH more slowly after the tide goes out.
In most states using a water heater solely for space heating constitutes a code violation, but combi heat/hot-water systems are usually allowed. Some (but not all) states allow "open" systems that use potable water in the heating loops, others do not. (I don't know what code is on that in AZ.) In MA open systems are allowed, but for those system code explicitly requires a minimum amount of flow to occur even when there are no calls for heat, to mitigate stagnation related health risks. But
with heat exchanger isolation there are no such requirements.
With radiant slabs the operating water temps are well below the dew point of natural gas exhaust from ~80% combustion efficiency hot water heaters, and unless you design the hydronic end of it to protect against condensation in the heat exchanger a cheap gas hot water heater will suffer an extremely short service life. If using hot water heaters for slab radiant heating (either open or isolated systems) a condensing hot water heat is by far the preferable heat source.
The
A.O. Smith Vertex is specifically designed with side ports to be used for space heating applications, but has no internal heat exchanger. The
Polaris is a very similar HW heater that is also ported for space heating. They differ in price and construction details- the Polaris is probably good for ~20 years, the Vertex for ~12 in typical applications, either can work well in your application if you get the hydronic design right. (BadgerBoilerMN who posts here has a great deal of experience on designing slab radiant heating systems around the Polaris. Were I to embark on that path I'd run any proposed system design in front of him before diving in, and pay him for the consult. Hydronic heating design isn't rocket science, but it's WAY more than just a plumbing exercise.)