Couple of questions.
If you open the heater drain with the bypass valves in the normal position do you get water coming out of the drain. Your post indicates that you do.
You said you have no water at all coming out of the hot water faucet. If you change the bypass valves to the bypass configuration do you get water coming out? This would indicate that the plumbing external to the heater is ok.
If you could loosen the hose connection on the hot water outlet of the heater, with the heater full of water, and see if some water comes out of the heater, that would narrow the options.