You can put a tee anywhere that it is convenient on the hot and cold. 1/2" is fine to a powder room if you are talking a sink and toilet.
You can gain a few inches in height by just using shorter nipples off the waterheater.
I am not crazy about the WH flu running so close to the PVC drain pipe, but more important....it looks like single wall flue pipe. If so, it appears to be closer than 6" to the wall, and that is a big no-no. The easy fix is to replace it with double wall ( B vent) pipe.