If an immersion heater fails and boils some of the water in the cylinder, the hot and steam are going to come out of the top (the vent pipe).
The immersion heater generally does not reach to the bottom of the cylinder (unless you have a cylinder only 28" deep).
With temperature stratification, the coolest water is going to be at the bottom... where the cold feed is. Heating water at the top of a container, an insignificant amount of heat travels downwards, because convection currents travel upwards. I'd be interested to see hot water coming out of the bottom, past the uninsulated lower surface.