Yes, it will draw from the domestic hot water. The heat exchanger will loop and recirculate back into the water heater and be controlled by a pump and a thermostat.
Here are some pics with the heat exchanger installed and running. This will virtually eliminate the cost of heating this tank at 84F. The tank water drops the hot water about 8 degrees by the time it flows through the exchanger.
Thanks. Been working hard on getting it all plumbed in. Next I have to plumb in a 275 gallon container behind the wall that will have a constant drip into the tank.