An extra quart is over full. Has nothing to do with performance or longevity.

 

Overfull,or full of air?

Maybe he was telling you that rebuilt transmissions will read full when you first fill them,but after a short while all the air will be bled out of them,and they will need a additional quart or two to bring them up to the normal fluid levels?

 

I've never heard that advice given for a 700R4. Now for a 2004R it is recommended. It has a filter with the pickup hole on top. Under hard acceleration or launch at the track the pickup can become uncovered when the fluid is forced towards the rear. It's recommended to fill 1qt. overfull mark with stock pan or use the 700R4 filter with deep pan.
The 700R4 doesn't suffer from this problem, it has a shorter pan with the pickup hole on the bottom of filter.

 

It's my understanding that if you over-fill an automatic tranny the oil foams and it's just as bad as running it really low on fluid,

 

mmmmmm sounds like they are looking for more business....you do this and ill see you in a couple weeks. :nono:

 

It's my understanding that if you over-fill an automatic tranny the oil foams and it's just as bad as running it really low on fluid,

1qt. isn't going to cause aeration, 2 or more surely will. Here's a good 2004R build article from Donny Wang with the fluid problem in a 2004R trans. Scroll down about 3/4 of page to the paragraph that starts with (The stock filter).
http://www.drwtransmission.com/thm_200-4r.htm