Ok, the specific equipment helps - as does the wire color key. I assume the PD4500.
It appears you are jumpering the two legs together when on inverter power. That is fine as long as you understand that you are responsible for power management. Going from 100 amps (110VAC) down to whatever the inverter will provide (25 amps, max) requires some human involvement. For example, the battery charger is typically on a circuit that is not powered from the inverter. Obviously, charging the battery from the inverter would not work very well.
As Drew points out, a 3500 watt inverter is oversize for a 12VDC battery bank. It will work but you can damage your battery bank pretty easily if you run it very hard (near max output). The referenced article is very good. Just another thing to manage which is certainly not hard but part of living 'off-grid'.
I think the 'Battery Bank 2 @ 140 Ah' label plus what you've said above means that you have four, 12VDC batteries that are each 140 Ah. So, you have a "house" battery bank that has a total capacity of 560Ah and 280 Ah usable. Correct?
I realize we are fairly high level at this point but please do plan a good battery monitor (like this
) to keep track of your system and take care of your investment.