If you look in the travel trailer heading in the forum for the post "water heater not working", you will find some pics of the back of several water heaters showing the valve in fill mode. That valve needs to be horizontal to fill the heater as shown in the pic. I think Steveo57 had the pic, if the valve handle would have been vertical in that pic then it would be in bypass mode and not filling your water heater.
2018 Raptor,428SP w/full body paint
2012 Harley, Ultra Limited