"Thanks. Does this not mean though that the return air mixed with water vapour from the humidifier is then fed through the intake fan and blown over the heat exchanger ? You would lose most of the moisture this way right? "
Lose it how? The moist air gets heated, but it still has exactly the same amount of water in it, as there is no place for the water to go. There are two types of humidifiers. The type you have is a bypass model. It bypasses, or short circuits some of the air from the hot air plenum through the humidifier and into the return plenum. That allows the unit to be cheaper, as it does not need a fan. The other type has a powered fan and only goes into the hot plenum. Take a look at an Aprilair 760, which is a powered model.
The disadvantages to the bypass model are that you do lose some blower capacity, but that probably isn't an issue in most heating systems. They usually have some sort of sliding piece of sheet metal to allow the bypass to be blocked during summer cooling. Whether most people remember to move it is another question. The other possible disadvantage would be if passing moist air over the heat exchange could shorten it's life. I don't know if that is a potential issue or not, but usually exposing steel to a moist environment is not a good idea.