I live in Southern California, Orange County to be specific, and want to replace my 40 gallon (gas) water heater located in the middle (inside) of the house with a tankless water heater (electric powered - gas driven) to be installed outside of the house. Should I go with a stainless steel condensing exchange unit or go with a copper-based unit? Any insight is greatly appreciated.
Instead of focusing on the materials, you should focus on the significant differences between condensing and non-condensing units.
Condensing units are more efficient but can be more difficult (read: expensive) to install as a retrofit because they generate acidic condensate (water) and you have to be able to get rid of that water. This is a big deal if they are installed inside the home, maybe less of a big deal with an exterior installation. This being said, there are standard solutions for the problem.
Non-condensing units are less efficient but you do not have the condensate issue mentioned above.
Both types require a different venting system then your traditional tank heater. Condensing units exhaust cool vent gases and can be vented with cheap PVC pipe. Non-condensing units exhaust hot acidic gas and must be vented with special corrosion-resistant vent piping.
Manufacturers require that their units be installed by qualified persons. I would suggest (I know this is a DIY site, but...) that you consult with a qualified installer, as they would be able to outline the difficulties and cost differences between the two types in your specific circumstances.