#1 - The water level never drops below the overflow in your demo. What happens when you leave the pump off until it does?
#2 - It looks like you've got a closed system. The back 'uptube' should be open to prevent a syphon. Is this why you get that drop in the overflow after if fills?
I can drop the water a little in the clear tube but I always keep it that way just so I don't hear the water trickling over the top in to it. And the tall up lift tube at the back is open. I have left it turned off lots of times over night and it always starts back up right away as soon as I turn the pump back on.