The bypass is there to provide a path for some flow at all times, to prevent the pump pushing against total resistance if circumstances allow all TRV's or the motorised valves close off with pump still running. I think regs now state it must be an auto bypass valve on new systems, (you might already have one looking at the pics).
Rattling was probably the flow trying to force its way past the gate inside the valve, you've suddenly made the pump work a lot harder and force the water round the rads instead don't forget! Bypass will still be hot, as some flow will be getting through, unless you close the valve totally.
Cylinder may well have been boiling (or close to boiling), with no thermostatic control, it can conceivably get to the same temperature as the water leaving the boiler, with stat fitted on an S plan, the stat should be set to about 65 °C, once the cylinder is up to temp it will close the Motorised valve on the HW circuit and boiler will either shut down if CH is satisfied, or put its full effort into the CH system until CH is satisfied/HW calls again.