Yes, you still need the internal heater if you want "hot" water.

Listen to Cavimum. You'll never get an actually hot wash without an internal heater regardless of tank or on-demand supply-point.

What Cavimum said. It doesn't matter if your water heater sits directly on top of your washer. HE machines use so little water that the thermal mass of the inner and outer tubs as well as the clothes themselves cool the low volume of water rather rapidly making it virtually impossible to get a hot wash.

The Bravos 850 as well as the forthcoming 950 are the ONLY topload HE washers that allow the internal heater to be used on all cycles and water temperatures.

A slight correction to Mark's post: I have the Bravos 850 washer, and the internal heater cannot be used with ALL cycles. It cannot be used for the Soak cycle. It can be used for all wash cycles.

It is true you can also use the internal water heater to heat warm water to a true warm temp. This is important to me especially in the winter time when our water is naturally colder than usual.

I haven't used the heater on the cool wash temp. :)

My setup is really new, but I think the others might be right. I chose NOT to get the machine with heating because my instantaneous water heater has a remote as an option. That would allow me to bump up the water heater temperature temporarily (and thus more safely, to my mind). It costs about the same as the difference in prices between the heat/no heat washers, so I figured I could add that and have that bump-up ability for more than just the washer...
*However*, the washer works quite differently from a top loader. (I knew that! That's why I chose a FL. But I didn't know about *this* difference.) When you start a load, it adds a bit of water and tosses a little and adds a little water and repeats until it decides there's enough water. It's not like a TL at all where the water simply runs until it reaches the "right" level. It seems to be based on weight. Mine's an LG (wm2140c, I think), but I'm guessing other new machines are similar.

Well, that seems to be pretty much unanimous! Thanks all. I can now go back to obsessing about something else . (Markb - good point about thermal mass, and Timberframe, thanks for the details on how the water is added.)

Mara -- is your 850 the "X" model or the "non-X" model? I'd like to have the direct drive, but the Maytag website doesn't seem to list any of them now....

Thanks again all!

The direct drive units are the XL models. As I stated previously, the XL models have been revamped to include a larger capacity(4.6 cf)and other improvements to remain competitive with LG and Samsung. The revised 850 and new 950 are already available at several online retailers even though they are not yet on Maytag's website.