These have some of the worst instructions of any heater I have. I did the same thing you did when I got mine. You pull the knob only if you want to recalibrate the temperature setting. Pulling the knob allows the dial to rotate freely from the thermostat. If you are just setting the desired temperature do not pull the knob, just rotate the dial.
To recalibrate the dial you need to measure the water temperature, pull the knob and rotate the dial to match the actual temperature. Next push in the knob to lock the dial to the internal thermostat. Now turn the dial (with the knob down) to the desired temperature. You may want to place the heater in a something smaller like a pitcher so it will heat up faster so you can check the setting. I like this feature because it allows you to fine tune the dial to the actual temperature.
wow! this did it! thank you so much for your help!!! wow, those are
some confusing instructions!