Your on/off switch is if you wanted to run your water heater on shore power instead of using propane. A lot of people will run it electric like that if they are hooked up, no point in wasting even that little bit of LP.
As far as your reset light with the propane setting, first thing I'd be sure to check would just to be to try to light the stove burners and once they are lit then try lighting the water heater. Sometimes lighting another appliance gets things sorted out and something that previously wasn't lighting will then fire right up just fine.
Occasionally I had to do this process in order to test my furnace each season.