1. This is the way by which he passed.
2. This is the way. He passed by the way.
(Are both correct? If the two sentences in #2 are combined, can we get #1?)
3. This is the way by which he could understand the situation.
4. This is the way. He could understand the situation by the way.
(Are both correct? If the two sentences in #4 are combined, can we get #3? Do we have to use the preposition 'in' only?)
I wouldn't use any of these phrasings. Here's how I'd state these thoughts:
1. This is the way he went.
2. He went this way.
3. This is the way in which he could understand the situation. (OR This is the way he could understand the situation.)
4. This is the way he could understand the situation.
"by which" and "in which" usually make wordy sentences -- too many words used, when fewer words get the meaning across more smoothly.