The dealer told you wrong. The cold line on the bottom open, hot on top open, the bypass closed.
The cold water comes in the bottom of the heater, as it is warmed it rises, hot water is taken off the top of the heater. By pass is closed or you are just mixing cold water back in with the hot water.
For winterizing, all valves are just the opposite, and you drain the water out of the heater so it doesn't freeze and bust the thing wide open. Then you can fill the lines with antifreeze and the antifreeze won't get into the heater (which is not wanted because its too difficult to get all the antifreeze back out of it).