((My understanding is that the Heat Pump should not function while the Fuel Heat is on))
Yes you do not want the fuel heat as you call it to be running at the same time as the heat pump.
((In my case, the Heat Pump remains on when the emergency heat supply turns on.))
Not a good thing and you will have to fix that or call a qualified HVAC contractor to fix that for you.
I tried to read the rest of your question and the way it is written is very confusing. The questions and cures about wiring a fossil fuel kit or the thermostat to make this work needs to be done on site at your residence because there are to many circuits/low voltage landing points to try and remember here.
Here is what I suggest.
Read this
Product Application
This thermostat provides electronic control of 24 VAC
single-stage heating and cooling
systems, or 750 mV heating systems.
Then find it in your instructions that came with the thermostat.
Below is a link that will take you to the install directions for your thermostat just in case you lost them.
http://customer.honeywell.com/techli...0s/69-1714.pdf
Now go to the second screen down and you will READ where this thermostat is only good for one stage cooling and one stage heating.
Guess what. You have two stage heating and this thermostat will not work for you.
Next page down on the thermostat manual reads this.
Must be installed by a trained, experienced technician
•
Read these instructions carefully. Failure to follow these instructions can damage
the product or cause a hazardous condition.
•
Check the ratings in this booklet to verify that this product is suitable for your
application (see page 13).
• Always test for proper operation after installation (see page 9).
My final recommendation is for you to call a professional HVAC person.
Ask them to fix this major problem before YOU DAMAGE your equipment.
They will know the correct thermostat to use and they have the KNOWLEDGE to know how to hook it up correctly.
I just call them the way I see them. Good luck.