I've lost my manual, and am unsure what the heat

Grohe or AKA Hans Grohe will send you a manual if necessary or if you spell it right you can find a copy online to download. I imagine you missed removing a retainer.

There is a flow sensor in the circuit and it is not sensing the lower flow from just the hot water. When you put it on heat though it does.

The Economy 7 can control different types heater. Some heaters do not have off-peak ... but you can solve problem..
Copy following link:
http://waterheatertimer.org/pdf/QE7-INSTRUCTION.pdf
If timer is wired to two different elements, then the night rate element or off-peak element might be burned out. Test element with multimeter.
http://waterheatertimer.org/How-to-test-water-heater-element.html
Also this timer is wired so either Off-peak is getting power or Boost is getting power, but not both at same time.
If heater has off-peak element, then there will be a wire connected to terminal 5, going to heating unit.
If there is no wire on terminal 5, then there is no off-peak element, or wiring has not been connected. However you can change the timer function by moving wire on terminal 4 to terminal 5. Then only the off-peak timer function will operate, and not the boost.
You can also fool the timer, by setting time clock differently. Instead of setting timer for current time, rotate the dial and fudge current time by 10-12 hours so water heater thinks it's time for boost, but the actual time is during off-peak hours.
If terminals 4 and 5 both have wires, then either the element is burned out, or the timer has malfunctioned. Again, you can fool the timer by setting current time differently, and solve problem.

If you need further help, I’m available over the phone at https://www.6ya.com/expert/gene_9f0ef4df2f9897e7

Thermostat is likley problem , or limit switch control they regulate temp.

1) Copy following link for troubleshoot resources by type of gas control valve, Venting resources, and pro water heater forum:
http://waterheatertimer.org/How-to-troubleshoot-gas-water-heater.html
http://www.thetankatwaterheaterrescue.com/forums/forum3/

2) This odor can indicate incomplete combustion due to lack of air supply. Get more fresh air to unit. Check that flame is clear blue color. John Wood is American/AO Smith product so air intake screen is located on bottom of unit. Use mirror and flashlight to inspect. Clean with compressed air ad or feather duster.

3) Jw840nvh is 40 gallon natural gas. Natural gas is lighter than air and rises upward, unlike propane gas that is heavier than air. Install gas detector at height correct for type of gas.

4) For safety, install CO carbon monoxide detector

5) Review product manual for correct vent lengths and diameters.

If you need further help, I’m available over the phone at https://www.6ya.com/expert/gene_9f0ef4df2f9897e7

check the air intake

Contact a qualified heating engineer,they will sort it properly.

I do not have specific answer.

Open following links to identify product, download service guide and download manual for the different model numbers, plus parts list and other resources:

Page 3-4 of following manual shows switch settings for LP gas.
On-line manual can be word-searched for 'switch.'
This water heater has remote switch, which is the switch you are talking about. It also has limit switch and ECO (energy cut-off switch)
http://waterheatertimer.org/pdf/Atwood-installation-maintenance.pdf

http://waterheatertimer.org/pdf/Atwood-Water-Heater-Service-manual.pdf
http://waterheatertimer.org/Atwood-water-heater-resources.html

I'm not quite sure I understand what you have done but, make sure your compresor(outside is running and, that you don't have the thermostat set to "fan". You want the display to show "cool" and then adjust your temp. It sounds like you have the system set to fan and not cool. Provide me with a model number and I will see about getting you a manual.