I've always filled my stuff up to within a 1/2" of the bottom of the neck and never had expansion issues, including in the Mach. I would have checked that thermostat in a pot of water on the stove, with a thermometer. It wouldn't be the first time I've seen one act weird by not opening up at rated temp, or not open up all the way. Although, like Jay said, air hitting the probe is the only reason I could see the temp fluctuating rapidly on the gauge. Why did you block the bypass?