I would not guarantee a 3 valve system won't have a check valve, Nearly all RV water systems have check valves (I once designed an RV water system .. No, I take it back it too had check valves, 3 of them.
There is a check valve on your city water inlet.
There are two check valves in your water pump.
And on many water heaters, no matter the bypass system, there is a check valve on the outlet.
NOW: IF that check valve exists, then pressure can not back up from the Instant Hot dispenser to the water heater.
To the original poster.
You may have lost the air cushion on the water eater.. Part of the contents of the heater is a large Air Bubble that allows for expansion of the water as it heats.
To re-establish, cut off water flow to the water heater (Bypass valve or simply turn off water pump and DISCONNECT from city water or turn it off).
ALlow water heater to cool
Remove drain plug and manually open TPR valve at to
Let drain
Relace plug, close TPR, restore water pressure.