Is my indirect fired hot water heater hooked up correctly?
Yes it's a fairly common setup. As the heated water enters it rises in the tank. The return to the boiler is still quite hot and transfers heat to the cold domestic entering the tank. If the hot from the boiler enters the bottom the heated domestic ends up close to the same temperature as the boiler return and thus is unable to transfer heat. The setup in your picture is called counterflow heat exchange and it is typically the more efficient method. The other method is called parallel heat exchange if you are interested in investigating further.