I believe..

that the hot water floats at the surface of the tank.. cold water is forced in the bottom of the tank which forces the hot water out the top of the tank to the faucets.. as you run out of hot water, the cold water level goes all the way to the top of the tank and you no longer have hot water..

That's sort of my guess after looking at the way mine is built..

It hasn't been plugged in, in 2 weeks, so not hot water no matter what.. but cold water does come out of the hot side faucet (again, not plugged in, so whatever would come out the hot side would be cold) and with the supply ON, it drains freely with the drain valve open.. I shut the drain valve and shut off the cold water intake.. I open the drain valve and nothing comes out - which tell sme there's nothing in the tank to drain.. it drains when the supply is on because it just goes right through the tank out the drain..

Assuming its full of pressure, keeping the water from entering the tank.. but even with the hot water faucet OPEN, ot let the pressure escape, no water goes in the tank.. I don't get it..

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