When running on diesel: return the fuel to the diesel tank
If you loop the diesel return back to the input stream it will get hot and will not lubricate the IP as much
When running on VO: loop the fuel back to the input
If you return it to the tank, you are running it through the filter many, many, times and at a unnecessarily high flow rate. It can get oxygenated which can lead to polymerization. VO should make one pass from the tank to the engine compartment.
If you are using 3 port valves, you need a 3rd valve.
Valve #1: selects the fuel source
2 inputs from diesel filter or from VO filter
1 output to lift pump to IP
Valve #2: selects the return fuel destination
1 input from return fuel line from valve #3
2 outputs to diesel tank or VO tank
Valve #3: selects whether to return the fuel to a tank or to loop the fuel back to the fuel input stream
1 input from return fuel from IP and injectors
2 outputs to valve #2 or to "T" into the fuel stream before the lift pump
Read this, it might help:
1991 350 SDL Conversion to WVO