Heating house with water - not working good

I have a 3,500 sq ft home with a ducting system with 3 zones. We heat it with a heat exchanger that is fed by a 40k btu 50 gal water heater and a 97,000 btu aquastar 124bl. My mechanical contractor said that he did this with a smaller house and it worked great and saved them money.
As long as I am not using solar to heat the water, I don't get how this could save me money.
I told him that it wasn't able to keep our house warm in the winter. I live in the Santa Cruz mountains in Northern CA where it frequently gets down to 25-30degrees in the winter. He said that I have more than enough btu's to heat a house this size. The heater runs all night and air coming out of vents starts our luke warm (max 80degrees) and then gets cooler after about an hour (about 70 degrees) and my electric and gas bills went through the roof. I ended up heating 2/3 of my house with a gas fireplace and letting the heater, heat 1/3 of my house by turning 2/3 thermostats off.
I want to go a "normal" heating system and with gas fed forced air furnace. It seems like it is more efficient to have gas heat air versus gas heat water and water heat air. I need some facts to try to get my contractor to change this around for me cheaply. Don't you typically get like 65-70% efficiency when heating the water and then 65-70% efficiency when the water heats air? So if I assume 67.5% for both that would mean that I am trying to heat my house with 67k btu's ((40k+97k)*.675*.675)? I know this would matter on how efficient the hot water and heat exchanger are, but I am having trouble finding that information.
I just think this system stinks and I want a normal system. Any thoughts? Thanks
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Aquastar without pilot is 82 - 83 % efficient An old water heater is less as it scales up. Yes you loose on transfer. Get a 94.5 % efficient forced air furnace ans dump all that extra stuff. Keep the Aquastar for your regular water use
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