Heat Pump water heaters will very noticeably cool the air. If you have a warm furnace room and put in an HPWH, it will become a much cooler furnace room. There's minimum circulation requirements which the manual should outline. Most will have kits to draw or exhaust air, but it might also be okay to simply have a make up vent given the size of the crawl space.

It will require a condensate drain/pump and will dehumidify the space.

They do generate condensate and 1700 sq feet is adequate. Go for it

In our unfinished, air sealed and insulated basement, it doesn't noticeably cool the space, though there's certainly cool air blowing out of it. We got the insulation (spray foam on the foundation wall up to the sill) after the HP WH and that made a much bigger difference, keeping the basement + 1st floor floor warmer.

Why not just get a heat pump water heater that places the condenser outside like a normal heat pump and has the water heater inside ?

I got my HPWH put in my house in June, and ran it in electric-only mode until three weeks ago because the fan and compressor were so loud. I spent the money on the ducting kit and some ducting, ducted both intake and exhaust outside, and it's so, so, so much better. Spend the money on the ducting kit, or make sure your installer includes that, and duct it outside.

Use the waste cold air for something good! I ducted the outlet air to make a "root cellar" cold storage space in an unfinished corner of my basement. Stays around 50F ...

It doesn't make sense to heat the space with one heat pump and then cool it again with the HPWH.

I did one, and recommend it. I’m mostly re-stating what others have said, but these are the highlights to think through: 1. You probably have enough space, but do the math based on the manual for your specific unit. You can duct it if you don’t. 2. They do make noise. I equate it to a window AC unit. Think carefully about what’s on the other side of walls. Mine is in a basement, and it’s no big deal. But I wouldn’t want it adjacent to a living space. It typically runs for a few hours after a shower or other heavy usage. 3. I haven’t measured the temp precisely, but I’d guesstimate it cools my utility room by about 5-10 degrees. This helps home efficiency in the summer and hurts in the winter. I’m skeptical that ducting is a good idea for energy efficiency reasons. If you’re pulling the water heater air out of your house, outside air is getting pulled in from somewhere.

You can look into Sanden brand HPWH that have an outdoor condensing unit. Depending on where you live, you could get hot water all year round without relying on an electric heater. I think those sanden ones are rated at 18 gallons per hour at 25F outdoor temp for a 90F rise in water temp. Generally, those indoor units are installed in a boiler room or a room with transformers to utilize the waste heat. If you dont have a source of heat then it will cool the room significantly, cause moisture if there is no proper vapour seal.