It seems to me that your "simple test" is the reverse of what should be done. Seawater conducts and closes the circuit. Pure water does not conduct and therefore produces an open circuit. If you remove a wire, producing an open circuit, the sensor would indicate pure water and open the valve after the two minute start up period. Wouldn't a proper test be to short circuit across the two sensor wires, indicating conducting seawater, and see if the valve closes?
S/V MALAIKA II (SM336)