What you are seeing is expected behavior. As you know, all Simulink blocks (like S-functions) have several methods, which are run in a certain order during the course of a model's simulation. The Process View flowchart gives you a detailed view of what order the methods are called in. The issue here is that the Output method of the Switch block (which computes the signal "IV") is only run after Simulink finishes running the Initialize method on all blocks. So at the time that the S-function is initialized, the output of the switch has not been computed yet. So at initialization time, IV=0. Unfortunately, the time by which the value IV=1 is available is too late for initializing the state in your S-function.
What you're trying to do is introduce an "External Initial Condition (IC)" input on your S-function. Unfortunately, I don't think S-functions currently have this ability. The IC can at most be an S-function parameter that you can set before simulation begins.
I understand that your S-function may in reality be more complicated than a Delay, but I thought I should bring to your attention that the Unit Delay block in Simulink does provide an option for an External IC. Perhaps you can use this block in combination with your custom logic to achieve what you need?
I would also recommend confirming this limitation (of not being able to create an S-function with External IC) with MathWorks Tech Support and put in an enhancement request so that the development team of this need and can prioritize it if there is enough demand.
