Yes, the hot water heat pump takes heat out of the surrounding air in your basement to heat the water, ie it puts out cold air which would counter any active heating source you have there (as long as you are using hot water). I don't think it will significantly help with dehumidification.

I take it you don't have natural gas so you're stuck with electricity. You could just bite the bullet and install a slightly larger mini split for your basement along with the HWHP or just stick with your original plan and a regular electric hot water heater

Our downstairs is 500sf (1000sf above ground is 2 stories, but the heat pump there works great to heat both levels), if that matters. That one is 12k btu, and the one we are looking to do downstairs is 9k btu. I should have included those numbers in my original post! No natural gas - it is on all the streets around us but the NG company won't come down our street (we've petitioned them multiple times!)

Also, the heat pump would be used in the winter mostly, and the most humid time in the basement is the summer, when we wouldn't need the HP, but would run it on dry mode, I'm imagining.

Multi-year owner of a Hybrid Hot Water Heat Pump here. Located in basement in MD.

If you do the math, the BTU/Hr extracted by the hot water hybrid is minuscule compared to heat loss thru basement walls and I would expect no noticeable change in basement temperature and the dehumidification effect of the hybrid is also very, very small. (cups per day.)

The temperature in my basement has never shown a drop due to my turning the hybrid hot water heater.

IIRC the installation manual talks about enclosures for the unit. I believe that louvers on the door, or no door would be more that satisfactory. Wanting that, a grate covering a newly cut hole in either the door or wall would also seem to work.

Salti obviously knows the characteristics of the HPWH well since he is a technically-competent owner. I was going to tell you to look at the specs for humidity removal if they exist, but he's got the answer, cups. Don't be fooled into the idea that the mini split is a dehumidifier. Although mine are great at dehumidification, if they are not cooling, they can't dehumidify. If you want it to work best for dehumidifying, it has to be sized very well to the cooling load. That load is very small in a Maine basement. If you are running a portable dehumidifier in the basement, the heat load goes up considerably. That combo is not a bad thing.

If you run a portable dehumidifier or HPWH in the basement and do some living there, there is a way to cut the noise that I'd try if in the same situation. Take a look at the way the "stand alone" dehumidifier was installed in the attic in this study. You'd have to install dedicated duct and blower in this case, but you get the point. You could build your enclosure out of plywood. The idea is that you keep the noise in an unfinished area while ducting in the dehumidified air.

Residential Dehumidification Systems Research for Hot-Humid Climates

Building America Report - 0505

Feb-2005

Armin Rudd, Joseph Lstiburek, P.Eng., and Kohta Ueno

Is a HPWH a good alternative to resistance electric.? (I am guessing that you don't have an indirect tank with an oil-fired boiler. A lot of people in oil country call their boilers furnaces.) How is the "cool" in the basement going to be replaced by "warm"? If you need to run the heat pump to do that, you are pumping the heat twice. If for the sake of illustration, let's assume that both of your heat pumps are 5 x more effective than the straight resistance heat into a stone-hatchet electric water heater. Since you need to run both of them to make hot water, you are left with a system that is only 2.5 x more effective than the stone hatchet. Add in equipment costs, where does that leave you? Plug in your own numbers adjusting for heat needs vs. cooling needs in the basement.

The trouble with heating the basement with a MSHP is that your heat will be at the ceiling where you don't need it. The floor will be cold. You will need a way to provide lots of air circulation that caries the heat down. Some people do mount the high wall units near the floor. There are floor-standing/mounted consoles. They don't have the huge economies of manufacture scale so, last time I looked, they cost more and are not as efficient, but it might work better for you. Fuji has them.

Reiterating somewhat, I highly doubt that you will get enough dehumidification from a HPMS in Maine if your current situation involves running a dehumidifier very much. You will want to continue with that. If you size it to heat enough, I suspect it will be oversized for cooling. If so, it will be relatively useless for dehumidification. My exposure to that kind of a situation in Northerly NY state indicates that you need cooling in the basement with the dehumidifier running in the summer. That can work.