We usually recommend filling to the fill plug but you're right, it is pretty high. If you're within an inch with everything fully coated and the all the bearings full, etc. full it'll be fine.
I have a feeling most gearboxes in general are overfilled, I know the 205 only calls for 5 pints or so which really isn't much oil. It's nice to have a little extra to make up for leaks and for coating the parts and filling cavities.
Whatever you run in your diff is what you should put in the 203, the factory specs are out the window now that we don't pump the lube anywhere, it's all splash lubricant and 80-90 or better works great for that.