Hi Scott,
In BYPASS mode AMP IN is routed directly to SPKR OUT. So this indicated an issue with the cables, how the cables are plugged in or the amp.
Make sure you are are using the top speaker output jack first!
It is not a problem. It is only a problem if you are playing and the amp is outputting a lot of signal when moving the switch. During the transition from one setting to another, the amp will be temporarily unloaded. That’s the danger and why the advice is to do the setting first.
Here is a checklist you can go through to help. Yes, it is boring and repetitive. But this almost always helps people discover the issue themselves. Power Station: Troubleshooting Guide do the NO SOUND section.