Hi,
You did very well on the pics,

and now we can see what you have and what you inherited when you bought the camper. This is why it helps when you come with pics. You may not yet know what normal is supposed to be, but we can see that in your pics to help you better. And if a prior owner changed something.
You have the Rev 9 Atwood combo LP gas and electric water heater. I can see a problem, which may explain what you see.
This picture "looks" like there is no circuit board to run the heater's LP gas mode. The white plug is hanging out in the open, and the ignition cable is not plugged into anything. It is hard to see the circuit board. Is there one there?
This is what a Rev 9 circuit board looks like with all the parts of the controls
It may be that the board died, and a prior owner did not want to replace it and only ran it on electric mode. That is technically doable; they may have been on shore power all the time and did not need the LP gas mode when camping without shore power.
The next topic is this picture.
Your water heater switch in the bathroom "only" turns on the LP gas portion of the heater, not the electric portion. The point is, while you have flipped that switch on, the heater will not heat with LP gas as there is no control board to turn on the gas and start the ignition. Unless something was changed, the red fault light is generally for an ignition flame fault that comes on when you lose flame. The missing control board would signal to turn on the red light when a flame fault happens. There is no control board, no light. If your light is on, someone may have rewired something. Is your light on?
Now, how does the electric portion work? Two switches must be on for it to heat on electric mode.
Please take a look at the back of your heater in this picture. There is a white Romex cable going to the small metal control box. Next to where the cable goes in is a rocker on/off switch. That switch is one of the two switches that has to be on. It is often left on, and it is so hard to flip it on or off.
The next switch is a 125-volt AC circuit breaker inside your power center. Look for that power center, open the door, and look for the last 15 amp circuit breaker in the row. It would be at the far end of the breakers from the main 30 amp. Look at the label, and it should say water heater.
When you turn on that 15 amp breaker and the rocker switch is on on the back of the heater, AC power will be sent to the water heater's electric element control system, and the heater will start heating. That is if the element is not burnt out and there is water in the heater. Remember, your heater was bypassed; the heater may be totally empty of water. Inside the metal cover are a T stat and high-limit temp controls. You give the system 125 VAC, and it does the rest to heat and keeps it hot at 140F. The T stat will open and stop heating when you reach 140F and then turn on again as the water temp drops.
What have you done to prep the water system or water heater for start-up? I see the drain plug with a radiator drain cock on it screwed in.
Your prior owners may not have treated the water heater very well. I have seen the drain cock setup before; yes, it allows the heater to be drained easier. However, there are some drawbacks to it. That steel or brass adapter is screwed into an aluminum tank. The tank can be cross-threaded by the stronger metal of the plug, which is easy to do when it is screwed in and out for spring cleaning if it was ever cleaned. Atwood used a nylon plug on purpose, so you will cross-thread the plug and not the tank if it is screwed in on an angle. You replace the cheap plug and not the expensive tank.
I start with a compressed air check on any camper I restore to ensure there are no holes in the tank before I put water in it and the camper. Easier to clean up an air leak, than a water leak. If you have a small air oil free compressor, you can test for leaks using 50 psi of air. I can explain how if you have access to the compressor and can regulate the pressure. If you have no compressor, you can do the water flush with a wand and look for leaks at no pressure, as the wand cleanout should be done every spring to get all the crud and minerals out of the bottom of the tank.
Camco sells a water heater cleaning wand that looks like this. RV parts places sell them; they are not that expensive. It looks like this on the end of a garden hose.
You remove the drain plug, insert the cleaning wand, and turn on the water. Rotate the wand as you are flushing to spray all over the inside. All kinds of stuff will come floating out. You keep flushing until there is no more crud coming out. It can take a while if this has not been done in a long time. You move the wand back and forth and rotate it to stir it all up and float it out. Whatever you do, shut the water off before you pull the wand completely out, or you will get very wet... Ask me how I know. It happens; it's only water.
You do not need full-blast power on the water, as the wand will bend. Open the water valve as much as you can, but not to the point where the wand bends all up.
When you have some water in the bottom, go inside and look for leaks. The tank has no pressure, but if it drips with zero pressure, it will leak constantly when under pressure. That heater may be the original. If it has been cared for, it can last 25-plus years. But it can leak in much less time if it is not cared for. There is no control board, and your heater was bypassed, which may indicate other issues. Hopefully, the tank is leak-free.
That should get you started. If the tank leaks, you will need to sort out plan B before you turn off the bypass and return the system to regular operation.
Feel free to ask more on this or anything you do not understand about what I said. Glad to help.
John