I have a Honeywell whole house humidifier model HE240. Its installed on the warm air supply. I thought this would put the humid air into the warm air stream. Instead its blowing air to the cold air return. The cold air return also has a very high suction so it must be sucking air out of the Humidifier via the bypass tube I am thinking the air would just circulate around from the cold air return to the humidifier and back to the cold air return. Is this correct way for it to operate?
That is the way it is done today by almost every residential humidifier and it works.
This is a "normal" installation. the humidifier can either be installed in the supply or the return. Trust me, the humid air is going into the house. just set the humidification to where you want it and let the magic happen.