proper fluid level on 727TF

If your filter has been dropped to the bottom of the pan, then you can run quite a bit lower than that.
I'm not sure where the factory runs the level, but I'm guessing that when the fluid is fully warmed up it might be as high as you are thinking, but more probably a good 1/2 inch to an inch less. You don't want the spinning guts to be churning up the fluid.
I have done oil changes on those where the fluid level was just a bit higher than the pan was deep. I have changed the O-ring on that tube and not lost any oil.