The tank is nothing more than a 'wide spot' in the hose connecting the water pump to the hot water faucet. Open the faucet and water gets pushed by the pump through the hose, through the 'wide spot' (water heater tank) and out the faucet. Something is blocking the water flow in the above scenario, either a closed valve, (which you say you've checked) or a blockage in the line. By removing the cold inlet connection, you're checking that water is flowing at least that far.
Some folks report hot water issues when both hot and cold valves have been left open, like at an outside shower, and the shower head shut off closed. With both valves open, water can 'bypass' the rest of the system and flow from one side to the other without pressurizing the rest of the system.
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Bob & Donna
'98 Gulf Stream Sun Voyager DP being pushed by a '00 Beetle TDI
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