The physics of vortices, instantons, and deconfinement is studied for layered superfluids in connection to bilayer quantum Hall systems at filling fraction nu = 1. We develop an effective gauge theory taking into account both vortices and instantons induced by interlayer tunneling. The renormalization group flow of the gauge charge and the instanton fugacity shows that the coupling of the gauge field to vortex matter produces a continuous transition between the confining phase of free instantons and condensed vortices and a deconfined gapless superfluid where magnetic charges are bound into dipoles. The interlayer tunneling conductance and the layer-imbalance induced inhomogeneous exciton condensate are discussed in connection to experiments.