Agree with justold.
Yes, "sounds like" the sending unit is not shutting down the circuit. I would go to a three position switch as justold stated, and replace the thermostat sending unit.
To answer your other question, I feel it is o.k. to run just a manual on/off switch. I did this as well, some people disagree, "what if you forget to turn them on?" I have mine set up to turn on the water pump and the fans.