OK......
1st Photo
Bottom Valve is Cold Inlet/Bypass Vlave.
In current position (parallel with cold line) water goes IN to WH Tank via lower cold inlet connection
2nd Photo
Manual diagram generic cause it is NOT specific to your valving
(Owners Note is correct....Winter/Valve straight Up/Bypass Mode & Summer/Valve parallel to Cold water line)
If the Cold Inlet/Bypass Valve is the ONLY valve on your WH Tank----NO Valve on Upper HOT Out connection then your LACK of Hot water is due to failed check valve in the HOT Out connection (nipple screwed into WH TANK has an internal check vlve that are common to failure/Clogging etc