ATF being brown is overheated ATF and if its the old 236.10 or 236.12 ATF it will discolor to a yellow/amber just like chrysler ATF+4 and Allison transynd ATF - they still are serviceable.

rising level is a bit strange - glycol mix would cause major problems and show up as milkshake like mentioned above - the worst part is that the clutch material delaminates when water/glycol hits it. The glycol also forms gel blobs when mixed with either engine oil or ATF.

We are believing you checked ATF when hot in any case (you mentioned you tore into the transmission). Quite oddball.

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2012 BMW X5 (Beef + Granite suspension model)

1995 E300D - The original humming machine (consumed by Flood 2017)
2000 E320 - The evolution (consumed by flood 2017)