A faulty modulator will allow oil to get sucked through it, a good one will not.
I always heard that when you overfill a trans or motor the rotating parts whip air into the fluid that is in the pan. The idea is that the proper fluid level should be a fair distance below these rotating parts. When you overfill it, the level is so high that it touches those rotating parts.
Air does not lubricate, so the little bit of oil that is present in that frothy fluid gets overworked , burnt and starts to allow metal to metal contact.
Also, oil expands when it gets hot, and overfilling can lead to pushing the excess out the vent.
I can't say that I know all that is the absolute truth, , it's just what my pappy tol' me.