When cold, some of the ATF will drain out of the converter back into the sump. When hot and running, the converter is full and there is less oil in the sump. The oil doesn't expand that much. The principle here is to make sure there is adequate ATF to completely fill the converter, otherwise, if air gets inside there, it will produce cavitation and will not perform it's intended function. The torque converter is the highest volume resevoir for ATF inside the tranny. Kinda like the engine. When it's running, a good part of the oil is everywhere but in the sump. It's your basic gravity thing...
1987 BMW 325
[This message has been edited by jeffsr (edited 04-12-2000).]