I don't have AC in my van (I do in the car) but I have recirculation.
Basically when you have AC you have 3 radiators, 4 for a turbo. You have 1 or 2 up front in the grille that just lose heat from the engine or intercooler as appropriate - this heat goes into the air you drive through and is lost.
You have another radiator called a heater matrix which is also on the engine coolant circuit and probably before the main radiator, but mounted behind the dash in the air ducting. Heat lost though this radiator warms air in the ducting, typically it does it all the time, but unless you select a heater control position that allows that air to waft into the cabin you don't actually get the warm air.
The last radiator is on a refrigerant circuit and is called an evaporator and is in another part of the air ducting, this one is connected up backwards in that it takes heat out of the air in the ducting to make the refrigerant expand from liquid to gas (like when you run off a propane bottle at full flow and the top starts to ice up). This radiator will only be working if the AC is turned on because it needs the compressor to move the refrigerant around and compress back into liquid form at the end of each cycle.
So you are barrelling along at full speed on the motorway or interstate on a warm day with AC turned on. The heater matrix will be hot, the evaporator will be cold, probably the engine is too hot for the heater matrix to cool so the thermostat will be open and the radiator will be hot too but you needn't worry about that or the intercooler any more. What you have on tap is a hot air supply and a cold air supply. The heater controls simply open and close flaps by varying amounts to mix the warm air with the cold, or fresh air to get the cabin temperature you want.
Normally air is drawn in from outside through the cabin air filter and this fresh air can be mixed with warm air (some is diverted to the heater matrix). It seems, and I haven't got my head round my heater controls at all yet so I am working on my understanding of Vics explanation (like you needed another interpretation) that warm or mixed air is only available to the lower vents, not the upper vents. The upper vents are supplied with fresh air, but the fresh air is first passed over the evaporator, so if AC is on you get chilled fresh air (one assumes the diversion of air to the heater matrix is upstream of the evaporator) - after the evaporator some air is available to the upper vents and the rest goes down to rejoin the heated air, depending on the control settings.
Now recirc. is kind of totally independant of all of that, although it is useful with AC. When recirc is off the fresh air comes in the front of the vehicle, and somewhere towards the back behind some trim is a outlet vent to let the stale air out. When you switch recirc on, flaps move around and the fresh air no longer comes from outside, but from the outlet vent, so you get your used air blown back into the front of the cab again. This is useful when you have AC on and it's hot outside because you can recirc the already cooled air so your AC has less work to do. Also, as the evaporator chills the air moisture in it condenses and falls out of saturation, reducing humidity and taking out impurities which get condensed as well. However, there is only a finite amount of oxygen in a given volume of air, and each time you breathe it you turn a bit more to CO2, hence the recommendation not to use it continually, or in MBs case a 15 minute timeout.
So my van without AC also has recirc - why? Well if I drive through a tunnel, the air in it will mostly be exhaust fumes, so if I remember to hit recirc before I go in, I will be recirculating fresher air than is available outside. The same if I pass a farm and don't want the manure smell in the cab, I can choose recirc and keep the less smelly air for a while.
In my car I like to use recirc with AC to take moisture out of the air, particularly useful in the winter here when when moist air just turns to mist on the windscreen, I can mix it with warm air, but over a period of time I will dry the air out and reducing the amount of misting (or worse freezing) on the inside of the windscreen.
Why is it that if you don't use AC for 6 months and then turn it on you get a funny smell (disgusting some would say), well because your evaporator makes condensation, it gets damp, which is fine when it is being used a lot and the dampness can be dried out, but if you leave it sitting idle for a long time bacteria will start to grow in the moisture and it is these bacteria that make the smell.
So basically all your heating and cooling system is, is a hot radiator, an optional cold radiator and bunch of flaps to determine how much air to pass over each and re-mix, oh and a big fan to help the air along.
I have 3 dials on my non AC dash, one sets the fan speed and if I push it in it engages recirc. The next controls the flaps to determine how warm the air is - Vic's explanation is that the air that this controls only comes out of the lower vents. The rightmost dial is the biggest mystery to me it has arrows and dots and a rectangle, and in some way seems to allow me to choose which vents get air, but by Vics explanation it does not alter the source of the air, just whether the vents are supplied or not, thus the upper vents may or may not have air supply, but it will always direct from outside (or from recirc) via the evaporator but never via the heater matrix.
I can sort of understand this approach, warm air on my face makes me drowsy, fresh air wakes me up. In my car I either have the vents blow warm and risk falling asleep, or put a jumper on and have the vents blow cold. Sounds to me like I get a better option in the sprinter which is to have the lower body warm and the face cool, although I suspect I have control flap issues because I only seem to get max heat or fresh air.... That of course was before the strong smell of oil seed rape the other day made me check my cabin/pollen filter, now that I have installed one I might get slightly less airflow, but with lest dust and pollen in it!
Apparently we have different interpretations about what Vic meant about the heater in relation to the dashtop vents. 
Can't picture them...
...sounds like you got your questions answered.