The pin has to be IN to fully filter the oil. The pin blocks the oil coming in from the oil pump. The oil must then flow out the 1/2" NPT port, through the filter, and back to the engine via the other 1/2" NPT port (rear). If the pin is out, any filtering will be bypass only, just like the 235. In Phat's article about converting a 235 to full filtering oil, he installs a plug in the galley coming from the oil pump. The pin in the IN position does the same thing as the pipe plug.
If the pin is in the IN position, YOU MUST RUN AN OIL FILTER!!!!
