With the engine off the pumps aren't running, so all the fluid is in the bottom of the case or in the torque converter. Some of the fluid I believe may even drain out of the torque converter with the engine off. So that's why you end up with a high dipstick reading, even with cold fluid. When the engine is started the fluid begins to circulate though the transmission, with varying amounts of pressure, this brings the fluid level down. Then you are correct, as the fluid heats up it expands and the level increases again.
Gilly
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