Don't let that linked to post scare you. Look at the line coming from the top of the water heater to your bypass system. Where that connects to the water heater there should be a check valve installed. It will either be plastic or brass. The quick fix is to take the piping apart and remove the piston and spring from that check valve. Basically gut the check valve. If there is not a piece inside the check valve it may have got pushed downstream a little bit. Since you said you have water when bypassing it will be before the bypass.
You can get a new check valve online or at Lowe's/Home depot and replace it at a later date.
NOTE re the last response (he said what I would have) Had a mother/daughter team. they had spoken with the maker and no joy.. I explained just wahat Schlep said and just like that they were in Hot Water (A good thing in this case)
They were unable to remove the valve for replacement (That tight) This is a major issue with the single bypass valve systems.
What is the purpose for this check valve? When you have a single valve bypass system.. Well without the check valve water will "Back fill" the water heater. NOT a good thing in cold weather.
With it that does not happen.
With the 3 valve system I had. You don't need the check valve. Thus I had none.