You are right. The two switches are independent of each other. When plugged in to shore power, using the switch at the water heater, you are turning the water heater on (electric mode). They put it there to make you think and remember "Is there water in the tank?" Never turn electric on with an empty tank.
Using the switch inside the camper does turn on the flow of propane and ignite the pilot light.
Here are two possible issues (I've had both!):
I was boon docking once and couldn't get the propane to ignite and heat water. Cold showers suck. Discovered that my water heater has two thermostats. One for electric mode, one for propane. I switched the wiring around and had hot water by propane while boon docking. Ordered a new thermostat and replaced the bad one when I got to my next destination. Link:
https://www.amazon.com/gp/product/B0...?ie=UTF8&psc=1
Here's a link to a youtube video for a suburban 6-gallon water heater and how to replace the thermostat.
Using this video you can figure out how to switch the wiring to see if you can get the electric power to heat your water and then your propane won't ignite. It's tight but there should be enough wiring to do it.
If this does not fix/identify your problem, it could be the small plastic on/off switch. They're pretty cheap on Amazon, be sure you buy a 110V switch that handles the amperage for the water heater.
Hope that helps.