Well, FART!
Just when this thing starts making sense, it all goes screwy again. We have got to be missing something here. You should be able to get that transmission so hot it boils the fluid without it forcing its way into the transfer case.
I cautiously suspect you may have hit on the problem. Any piece of equipment like that has to have a vent of some kind or some way to control pressure.
Under normal operating circumstances its going to heat up and build a few pounds of pressure. Those seal were not designed to handle that. Does the dipstick have a seal on it?
Most of the time I have overheated a tranny, it boiled out the dipstick. But most transmissions lately have seals to keep out the dirt, and they don't let the pressure out.
I know that transmission has some kind of a vent, because this outfit
http://www.transmissionhead.com/
sells a tube for it.
I just realized something. I run almost exclusively to Fords, Jeeps, and Mercedes, but it just so happens I have a transmission like yours sitting in a wheelbarrow in my tractor barn.
It came out of a friend's truck we are going to rebuild. I'm going to post this, and when I get a minute, I'll walk out and see if I can find a vent on it.
I'm under the gun right now, I have to head to the swamp shortly, and I need to have a lot of stuff done before I go. But I will post back before I do.
J.