Depends how handy you are with a multimeter.
Your initial diagnosis sounds spot-on, but it is what is or is not causing the mid-way valve to switch across to 'hot water only' side once the demand instructions for CH are removed.
It may be the frost-stat malfunctioning, as VHG suggests, or it may be a malfunctioning valve, which is incapable of responding to the instruction from the controller to shift back. There is a position-sensing system (often 2 micro-switches which run on a plastic cam) inside the gubbins of the actuator.