We just did this exact thing in December. Ridiculous- not at all. But to quote the heating contractor, "it's expensive real estate". However, we would do it again. We have a two story home. The furnace closet door faces the family room, the side of the closet was a wall in the kitchen. We removed the furnace, put in a high efficiency dual speed model in the second floor attic space, and replaced and insulated all the duct work in the house. It took 5 and 1/2 days. That now empty closet space will be incorporated into a complete kitchen remodel. Part will be pantry, and part will become a built in desk area with file drawers, cabinets above and space for the computer. Some additional benefits include the fact that we cannot even hear the furnace now. Before we had to turn the tv volume up whenever it came on. We also have a better balance of temperature between first and second floor. Before, we had a ten degree difference. And lastly, we are feeling very "green" with the insulation and energy efficiency. If you can afford it, I'd recommend it. Those closets are a big waste of space. The heating guy told us all the builders are putting furnaces in the attics of the new homes. Certainly makes sense.

Is the crawl space large enough for a furnace? We put a sideflow in ours.

Thanks y'all. I don't think anything would fit in the crawl space but it's an interesting idea. I hadn't thought of that. We're going to have GC in in a few days to discuss our kitchen...maybe I'll put this on the list too. When I think about the little shed we bought to store junk in, or the matching one we'll need to buy for more junk, this might make more sense fiscally. :D