Water heater works on the same principle as a stix and brix. When you run out of hot water you just get cold out until you stop using it and let it heat back up.
When in bypass mode the water heater should be totally isolated from any water input so not sure what you are seeing. It almost sounds to me like you are opening a low point drain.
What I was suggesting in my original post was to drain the water heater using the large drain plug (probably about a 3/4 or 7/8 size plug. Depending on the brand of water heater this may also be your anode rod. If you have an Atwood water heater it does not use an anode rod but if you have a Suburban water heater and you have not changed the anode rod now may be a good time to do so. You can also buy a water heater tank rinser at Walmart and clean the inside of the tank while you have it open. I do mine about once a year.
https://www.walmart.com/ip/Camco-RV-...inser/29764286
Warning; make sure you don't have the electric element on with no water in the tank. It only takes about 30 seconds with no water and the element burns out.