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re: "...I noticed that the transmission dip stick was reading over 1/2 an inch higher when cold. I thought that it should have a lower reading when cold...."
Yes, if it's checked properly, the cold level is much lower. But...
1) It's important to note the proper way to check. The first pull of the dipstick is invalid. You have to pull it out, wipe it, reinsert it, and then pull it out again to make your reading.
Also:
2) Obviously, the car should be level, but if you're a few degrees off (e.g., your cement garage floor was laid so that it will drain water out the door), it won't effect the level noticeably. Just don't check it on San Francisco hills.
3) And third, as I wrote in a Rolling article a couple of years ago, I measured the actual sump fluid's temperature by reaching underneath and holding an IR Thermometer against the sump's metal floor. I found that the car really never reached the 90 deg C that the "hot" scale is calibrated for. Usually, I saw temperatures only in around 75 to 85 C on a very hot summer day after extended driving (in winter, it barely reached 40 C after a long commute from work).
Also, in that article, I wrote that to be exact you have to interpolate -- here's an example that I used (I'm sorry I can't show you here the illustration I used in the article).
Suppose you find out that your fluid temperature is 60 C. That's 2/5 of the way up between the 40 and 90 deg C scales on opposite sides of the dipstick. Therefore, you have to envision that the appropriate "full" and "add" marks are 2/5 of the way up between the 40 and 90 scales.
Bottom line, re "...drained it down to the hot level mark and it does now shift better....", is that you may still be overfilled. Try to get an IR thermometer and check the fluid temperature, and then interpolate.
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