Bud-
With that kind of bypass valve, there usually are no inlet or outlet valves- just a check valve on the outlet. Throw the bypass valve to bypass position, and if the outlet check valve is working correctly the inlet and outlet piping are connected.
If the outlet check valve is not working correctly, then antifreeze will go into the water heater with the valve in the bypass position.
I took a similar bypass valve out of my coach, replacing it with a three-valve system. I wanted to eliminate the check valve(s), a common failure item. I had the room to do that, though.
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Mark
2008 Holiday Rambler Admiral 30PDD (Ford F-53 chassis)
2009 Honda Fit Sport
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