Diaphram is knackered on the changeover valve,its the brass item in the middle shaped like a mushroom.It senses the pressure drop as you open a hot water tap and moves a brass shuttle vavle which re-routes the system hot water thro' the heat exchanger there by warming your domestic supply.When the diaphram ruptures the shuttle does not move also attached via a push rod is the hot water on light so you may not be seeing this either.Cost of part less than £20 fitting a bit fiddly,time needed 1 hour max.
Guytawe, May 2010