Just noticed it as I was playing at getting rid of this mixed function to allow the controller to exclusively enable HW or CH. Done this by connecting the Grey wire to the White wire connection at the controller. Finally got rid of the horrible diode function that has just been consuming 2/3W...
Looking at this design it appears that if both HW and CH are on simultaneously the room stat is ignored until the cyl stat is satisfied. i.e. room temperature can exceed room stat setting.
Am I correct in this observation?