This is the inside of an Insinkerator SST-FLTR instant hot water dispenser.
The dispenser feeds depressurized water into the left nozzle, and the tank pushes hot water up the center nozzle. A third 1/8" tube runs from the dispenser to the nozzle circled on the right, but I can't figure out what that tube does. The dispenser works without it, and I can't detect any pressure or suction on either the tube or the nozzle when running water through the tank.
So what does the right nozzle and tube do?
Its a vent for the expansion tank. This tank allows the water in the stainless tank to expand, but also allows the hot water in the line between the dispenser and the tank to drain back down when you turn off the dispenser so you don't get a plug of cold water when you first open the valve.
When you open the valve on the counter, pressurized cold water flows through the left inlet and into the bottom of the tank through a tube inside the tank. This forces hot water out the center outlet. When you release the valve, the hot water in the line between the dispenser and tank gravity feeds back down and fills the expansion tank through the gray tube. Where the 1/8" tube tees into the left inlet, there is a venturi, which, when pressurized water flows through the inlet, it creates a vacuum on the 1/8" line, sucking water out of the expansion tank and back into the stainless tank. Once the water in the expansion tank is sucked out, a floating ball comes down and blocks the hole in the bottom of the expansion tank, which prevents air from being sucked into the tank, which would blow bubbles and cause the dispenser to sputter.
It's the vent. This is the top of the expansion tank where water goes when the bottom tank heats cold water.
I just had mine apart. My instahot was sputtering hot water and I found that it was drawing air from the plastic tank at the top. Still don't know exact fix but I suspect that it involves clamping off this third tube.
Starting on top with the faucet there are 5 tubes going into the Insinkerator faucet:
What I found is that there is a one way valve inside the faucet between the rubber line supplying the hot water and the plastic tube which will return water back to the upper tank. If the spout were to become completely blocked the water would circulate inside the faucet and return to the upper tank and from there drawn into the lower heating tank through cold water inlet some sort of suction caused by the running cold water.
When the hot valve is opened, the cold water goes throught the valve and then via the blue line to the left inlet shown above. At the same time it is drawing water from the plastic holding tank at the top. That water is guided through a tube inside the tank to the bottom and as it is pressurized it pushes the hot water out the top of the tank through the center line
I still don't know the exact purpose of this plastic right line. I suppose it is to drain the spout when the water is turned off (although I am not sure why this is necessary).
I found that my instahot is drawing air from this plastic line somehow. I suspect it involves something in the faucet but I don't know why air is entering that line. If the hot water is running, and a vacuum were on that plastic line it should be drawing the hot water running up the center tube. As long as their is water in the upper tank I am OK, but as soon as that is sucked dry air starts entering the lower heating tank and causing the sputtering.
My current "fix" is to simply clamp off that third line to prevent air (and water) from coming down from the faucet. No idea what problems that will cause.
If anybody is interested, I re-sealed the two halves of my tank with a 5 3/8 ID x 1/8 CS O-ring A568-253. You might do better with 5 1/4ID (A568-252) as mine was just a little large. I also found that the O-ring on the cold water inlet (which seals the quick connect) had failed and that is 5/16 ID x 1/16 O-ring A568-011.
