I bought a 240D for use in Northern California that originally was from New York (the rust tells that story)
The previous out of state owners rigged the car with an early GreaseCar setup and did it all out. Heated fuel pickup, heated fuel line and heated fuel filter. All this seems like overkill for the kind of weather it will be in now.

My first inclination is to simplify the whole setup but is this a mistake? Should I just leave it as is?

I'm going to have to re-plumb the whole thing and redo the wiring because I just don't understand the previous owners logic in routing lines and wiring [the wiring is frightening actually]

That depends.
Another member will probably chime in here (I have read about WVO conversions but have no intention of converting my car).

The trick is that WVO is thicker than diesel and can create problems if you run on it cold. As I recall, the concensus was that it MUST be heated to 120*F to avoid injector coking and everything else. If you are attaining that fuel temperature before it enters the IP, you're good, and you can take off as much as you like so long as you maintain that 120*. Otherwise, what is on there is not enough.

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1984 300DT turbo 138k mi

Still hauling me to school and back.

Handy Site:
http://www.dieselgiant.com/

If its already on there, just keep it.
It will run better on heated wvo.

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82' 300SD

I would leave it all on. Ideally, you want a minimum of 120, but higher is better. 160 to 180 works fine, and puts the WVO viscosity similar to #2. Don't forget, the WVO will cool a little after leaving the fuel filter and going through the injector lines. You will not overheat the WVO with your system.

Sketch it out, with the electrical and fuel lines, and see if it make any more sense. Some of the old systems seemed to be Rube Goldbergish......

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87 300SDL - 215K Miles !!
99 F-350CC Dually PSD - 190K
86 300SDL - 189K
All on B-100

Is there an easy way to tell how a specific switching valve works? (ie flow direction and what ports switch)

The system actually has two hoses cut and I'm trying to figure out what the hell was going on there

Some pics of the valves and wiring would help. The cuts in the lines might have been the location of a temp/pressure sensor that was later moved.

I'd leave it alone too. Heck, it might even have a thermostat built in that turns off electric heating components at certain temps.