The heated water doesn't go up the expansion pipe (ok the level might rise a bit) the cool water comes from the cylinder not the cold water feed tank, there will be no flow from the cold tank unless a tap is opened. thermosyphon is surprisingly effective, and the water will have no problems circulating around the cylinder. It has been used for cooling stationary engines for decades.I'm still pretty lost! ....
When all taps are closed, a small amount of water heated by the Willis heater will rise up into the expansion pipe, with the displaced cooler water moving downwards into the cylinder and/or the feed from the Willis heater. Since no water is being drawn, no water will be drawn from the bottom of the cylinder. So long as the taps remain closed, I cannot see why water at the top of the cylinder should get significantly heated - which would mean that there would be no significant heating of water in the cylinder whilst the taps remain closed.
I'm not sure how the system in your photo works, the outlet pipe seems to route under the inlet pipe? All the ones I've seen have been piped as your diagram.It seems no pumps. I can see how therm-syphon will move the water,
