How to setup a diverter valve for above ground

That 20 PSI does not mean anything to anyone that is going to help you. Every system will have its own "Starting Pressure". It all depends on how it is plumbed, what equipment is included (size and GPM), how big the pool is will address the issue of how much plumbing is involved, total feet & amount of fittings, valves, etc (mainly elbows create more restriction, raising the overall PSI, and if a Solar System is involved?

So, is 20 PSI normal, if you have a Solar System in an average inground pool in the backyard, then that could be about normal? If you have an Above ground pool with only a pump & filter, then that could be pretty high over normal.

The best thing is to backwash your filter very good, if possible use a sand filter media cleaner, available in most Pool/Spa Retail Stores. Follow the instructions on the label and proceed with the cleansing of the sand (media). Then when you turn everything back on to normal filter mode after the cleansing, make a note of the pressure! This will be "Your Systems" starting pressure. Take a "Sharpie" and write that number right on the filter tank. When the pressure climbs to 8-10 lbs over that starting pressure, backwash.

Check the valves that control the water in the pool equipment area. There are usually valves to divert water between the skimmer, service port and outlet jets. Also, the multi-port valve on the filter has several settings on it to control normal filtering, backwash, bypass, winterize etc. If all the valves are correctly set, you should look in the skimmer and pull the strainer basket out. Clean it if necessary and look at the bottom of the skimmer bucket to ensure that the drain cover is open.

is this heater is been install for above the ground pool it will be better either way to use a hard schedulle 40 pvc to prevent any checking in the hoses for future leak ,is the heater connections are correct in and out , mean from the return the filter go to inlet side the heater them the outlet side of the heter (HOT WATER) GO TO RETURNS of the pool ? also check if the pump got full prime not air,is the filter is clean? also check for any brocken parts inside the flowvalve control, after years low PH AND TA will destroy internal parts in heater include leaking heater exchangers.

If you remove the bolts around the top the handle and lid assembly will pull out. Under that is a spider gasket that needs to be replaced. Clean out and dry the slots where the spokes of the gasket go, and replace with a new gasket using contact adhesive or vinyl adhesive to glue the gasket in. Do not put anything on the top of the gasket.

It's a good idea to replace the diverter o ring and bearing while you have it open. This requires removing the handle from the diverter. The o ring is on the diverter shaft, the bearing is the white plastic ring that goes between the lid and the handle. After that the backwash valve will work like new.

There should be a screw hole in the valve lid that has a flat edge on one side (outside edge). The valve body has a matching flat edge that aligns with it.
In the event the handle was removed from the lid and diverter to replace the diverter o-rings it is not uncommon for people to put the handle back on the diverter 180 degrees of where it should be. The pointer on the handle should be aligned above the open port of the diverter. This is true of all multiport valves except the Hayward four way valve.

Your best bet is to replace the whole top assembly as the plastic top probally is etched and bad.

Honestly, I think you are over thinking both your problems. Reduce to 1.5 inch pipe as close to the ground as possible. It is more work for your pump to push water up a 2" pipe then a 1.5" pipe, but it will do either without any real problem.

As far as mounting your panels, as long as they are above the water level of the pool the water is going to drain out of them just fine. You can slope them slightly, but you don't need to.

If you don't have a manual you can download one here:
http://www.waterwayplastics.com/manuals/810-0092H.0209.pdf
Are you sure you didn't damage laterals when adding sand. Best to have 1/4 water in filter as you add sand. Be sure o ring is in place in multiport valve that fits on downtube.Be sure down pipe is not too low to enter multiport valve. The pipe should fit snugly into the multiport valve o ring. Be sure you have correct sand (pool filter sand only) IF all this is ok, try backwashing till glass is clear. Run on rinse position for a few min. THen go back to filter and see if it still pumps in sand.

The panel must have direct sunlight for it to heat. At 6 hours of direct light the 2'x20' panel should "collect" around 40,000 BTUs of sun heat energy. If water is circulated through the collector when sunlight is not warming it, the collector will act like a radiator and you will actually cool the water, so if you run your filter at night be sure to divert the water directly to the return and by passing the collector. So, if the entire area where the collector will be is always in the shade, it will not add a few degrees but actually cool the pool instead.

Panel is most likely creating too much back pressure for the pump. The solar panel creates a major restriction in the flow of water, which is why the hose keeps poping. You can try a couple of thing,

1. The panel should be installed after the filter. Sequence should be Pump to filter to panel to pool.
2. Install a longer hose from filter to panel, will reduce pressure. Or install a diverter valve which you can control the amount of water going to the panel, sending some straight to the pool.
3. If you roof mounted the panel and it goes from the Pump to filter to a booster pump to solar panel, you will need to install a check valve to reduce the back pressure.