Overheating or bad gauge?

[Excaliber]

My radiator has a bleed valve at the top. BUT, the top of the radiator is lower than the top of the engine. Air can get trapped in the radiator and never move out to the higher part of the engine, so in my case I cannot bleed all the air out from anywhere on the engine.

My method: Park the car with the nose uphill at a good angle. Take off the radiator cap and start the motor. Monitor the engine temp by both the gauge and by sticking my finger in the surge tank. When it starts to get good and hot I know the t-stat has opened and I'm getting good flow from engine to radiator. Put the cap back on, open the bleed valve at the top of my radiator. I almost always see some bubbling as air escapes there. I fill my over flow tank about a third, go for a drive, the overflow tank fills up more with water being pushed out of the "over full" engine. As it cools down the overflow tank water is sucked back into the engine. After a couple of cycles I find the surge tank is now at the perfect level, about 2/3rd's full. The overflow tank is also at just about the right amount. Now I know how much to fill the overflow tank to as well as the surge tank on the motor when everything is cold.

Assuming you have an overflow tank and you find your having to add water to it pretty often (TO often) my guess is one of two things:
1. Water is evaporating from the tank (car sits a long time).
2. Water is being pushed out of the motor into the tank and the tank is overflowing. Eventually the motor sucks ALL the water out of the tank and back into the motor. At some point, it won't have enough water to suck back in and the system is now "low". You then add water to the surge tank as well as the overflow tank.

The question then becomes: Wheres the water going???