“What does the (only) button on the MOTU Fastlane do? What position should it be in (in or out)?”
The small button on the USB Fastlane is a “Thru” switch. When engaged (pressed IN), it routes MIDI IN “A” to MIDI OUT “A”, and the same for Port B. It also bypasses communication to the USB connection on your computer. This is to allow you to use your MIDI rig without the computer being active. When using the Fastlane USB with a computer, always be sure that the Thru switch is OUT.