Here are some pics of my 3 tier HERMS brewery. I don't use a bypass on the HERMS because I only use it to maintain mash temps and for mash out.
When I'm ready for sparging I backflush sparge water through the HERMS into the boil pot.
I use a solenoid to regulate the sparge water and tee into the output for the HERMS. This makes it easier to switch from recirculation to sparge with just a turn of a ball valve.
A float switch in the mash keeps the mash height the same while sparging.