Water is running out of my waste line while the valve is set to filter.
That is the star shaped gasket, and it is the single most common failure on this kind of valve. It sits in the seat the rotating part presses against, and each of its arms keeps one port separate from its neighbours. Once an arm is torn, flattened or has come unseated, two ports are joined that should not be, and the usual result is exactly this: a steady dribble or worse to waste no matter where the handle is. It is a cheap part and it is replaceable without touching the plumbing, but the valve does have to come apart to reach it.
Which part is the key, and which is the diverter?
The key, sometimes called the stem, is the shaft the handle is attached to, running down the middle of the valve. The diverter is the piece at the bottom of it that actually moves across the ports, and on many valves the star shaped gasket is bonded to or seated in the underside of that diverter, so the two are often sold as one item. The cover is the lid the key passes through, held by a ring of screws, and the o-rings seal between all of it. If your fault is a leak around the handle, that is the cover and its seal. If the fault is water going somewhere it should not, that is lower down.
Should I rebuild the valve or buy a new one?
Rebuild, if the body is sound and the seats inside are not scored. A kit with the key, diverter, gasket and seals costs a fraction of a whole valve and goes in from the top, so nothing gets cut and nothing gets reglued. Replace the whole valve when the body itself is cracked, when a threaded connection has failed, when the seats the gasket presses on are worn into grooves, or when the parts for it are no longer made. On a valve of unknown age that has never been opened, a rebuild kit is nearly always the first thing to try.
The position labels on top have worn away.
Replacement decals are available, and they are worth having rather than guessing. There are versions for sand and for DE filters, because the positions are not identical between them. Before the new one goes on, note where the handle actually sits for normal filtering, since the decal has to line up with the internals rather than with the old printing. If yours is legible but faded, photograph it before it goes completely.
