Have you considered something like the veismans combi boiler? It handles both water and heat. They run off either propane or natural gas and will hook up to your existing system. Small about the size of a water cooler and quiet. You would still be able to get rid of the oil tank, but you would have to add a propane tank outside which is perfect if you wish to get a gas stove or a generator.

Im in the same boat as you. The basement layout is awful to put in a finished basement in a small home so the only way to do it is to figure out how to remove stuff. We have contemplated the heat pump with a rinnai water heater and a pellet stove or the combi boiler and a pellet stove.