jimbro - I think you have confused the red and blue sliders! There are four sliders in total (counting the fan switch).
The red slider - move toward the thick end of the arrow - heater matrix water flow 'on'.
The blue slider - move toward the thick end of the arrow - airflow through heater 'on'. I believe it's like an Uno - if the blue slider is 'off', you don't get any airflow through the heater (so, no hot or cold air).
In my experience it's the blue slider control that tends to break - but this is no great problem if it's broken in the 'full airflow' position.
Oh NO - I've just realised that all of this holds true for my '88 Bertone (and any 1500 with horizontal sliders) but with the 1300 the sliders are vertical and hence more like plane throttles. So - you are right all along? Or maybe there is an 'airflow' slider as I've described?
On my 128 Coupe (from the same era, of course) the blue slider controlled cold air entry into the heater. The cold air had to be 'off' in order for the heated air (red slider) to be effective. Perhaps this is how the 1300 works? As you can imagine, switching to an Uno or 1500 X1/9 is very confusing initially, as you turn the blue slider 'off' and lose all heated air...
Cheers,
-Alex