If a workstation is on the same LAN as the Kserver and the file source is set to Pulled from System server, will the agent on the workstation get it's patches through the Internet or through the LAN?
Can anyone help me on how to find this.
Short answer - probably. This really depends how your network us setup.
No doubt your agent is configured to connect to your WAN ip address. If you are only running one internet connection at your office and you don't have some strange firewall configuration, your router should be seeing this traffic and pushing it back to your Kaseya server without sending it anywhere near your ISP.
If, however, you are running multiple internet connections at your office, eg. one internet connection for your kaseya server and another for your normal internet traffic. you will need to check your router config.