So much for final conclusions.....
The replacement new breather started doing the same thing. So I did a test. I waited until the fluid disappeared on the dipstick with the engine running. Once it did that, I stopped the engine and checked the fluid and it of course had none on the stick. In less than a minute, I removed the new breather. Vola! The fluid returned on the stick and at about the correct level. So the problem is the breather but why are two new ones faulty?
Picture #3346 shows the 22 year breather (right) that always worked, and a new breather (left). The cap on the new one is clearly machined whereas the old one was stamped. Picture #3338 shows the inside of the new cap that has a slight cone torwards the middle and is smooth. When the cap sits on the body, it nests on the taper in the body and creates a seal. Because the old one is stamped, the indentations on the back side of the cap would prevent a seal ever forming.
If you blow into the old breather, it releases air regardless whether the cap rests on the body or not. The new breather releases air, but when the cap rests on the body, it seals the air. So the two are NOT the same part. Similar, but not the same. In my old Jan. 1968 parts book, they list a 111 260 00 58 breather for an auto trans. The EPC lists that now as only for manual transmissions.
I am going to use my old breather for now, but want to know if anyone has had a similar problem?