Don't have Atwood info but thinking if red light does not come on, that could mean no DC current or else the thermostat is telling it that the water is already hot. Your water is cold. (You can check the outside relief valve to see if it is under pressure with hot water but for some reason you have shut off the hot water supply to the hot water line with the by-pass and it is only getting cold water in the hot line.)
On the Suburban there is a reset button for the high limit on the thermostat so you'd think there is one somewhere on an Atwood.
Sounds like the start of a PITA but could get out the voltmeter and see if there is any DC on Both sides of the switch/light set-up when it is in the on position.