If you regulated the oil flow, you would also have to regulate the air supply and the logistics of doing it would create an expensive unit. Tankless water heaters for any fuel are not a hot item, (mainly because by the time they need parts the company is out of business. I just scrapped a large one yesterday), so I would suspect that you are about the total market for an oil fired one. Not a lot of justification for creating an entirely new line.
Yes they do make a line of instantanious Oil fired waterheaters. Its made by Toyotomi and it is called the BS-36UFF it produces 148,000 BTU’s you can find more information on this unit at http://www.comtec.net