old guy wrote:
could be the valve in the back is broken and not in the proper position
Exactly.......
Just because BYPASS Valve handle turns does NOT mean the internals actually change position
With water heated place hand on HOT outlet line close to WH.
Then have someone turn on HOT at a faucet.
HOT outlet should be hot but if it changes temperature then bypass valve is problem (should be able to feel flow thru bypass line also)
Otherwise...........outside shower is allowing mixing of hot/cold
BUT I really suspect WH BYPASS