Well, your experience had some other unknown factors.
As long as there is oil filling both sides of the cylinder at the start of the test, there is NO place for the rod to settle to. And you are right, it is straight physics. The rod settling down into the cylinder displaces oil, so where is that oil going to? NO WHERE with out an external leak. So because there is NO PLACE for the oil to be displaced to, the rod CAN NOT settle into the cylinder.
Like I said, as soon as you can put your finger into a full glass of water and spill no water, then your statement becomes valid, but because of simple physics , that is impossible.
Your theory is sound. HOWEVER....(read on)
Inside the double acting cylinder is a piston, which is bolted to the rod, or as some call it "the ram". That piston has a seal on it. Think of it as a cylinder in a car's engine. It, too, has a seal.
If the seal leaks, the cylinder will leak internally. If, in this case, on a loader-where the lift cylinder is partially extended, and has X amount of weight pushing against it, in this case, say 1000 lbs, and there is leakage (and there will be by design), it's going to leak down over time. The more leakage, the faster the loader falls. If it's only one cylinder, the entire loader will leak down. If it's both, it'll leak down. On Kubotas system, when the loader is "up" (cylinder partially extended), there will be pressure on one side of the cylinders, and only one side. In the control valve, the "down" and "float" side of the spool will be open to the tank port-which leads back to the transmission case. So if the cylinder has an internal leak, some oil will leak past the piston, then return directly back to the transmission. This, is of course with the hoses all attached to the tractor.
If the quick couplers are removed/uncoupled-they still will leak down if there's an internal leak. Experience speaking. That's how we test them at work, and how we were trained by John Deere AND Kubota-way back in the 1980's. Yes there's a bias because of the ram rod but they'll still leak past internally if the seal(s) have an issue, at least to a point where pressure on each side is equal-and in my experience, that does happen but it takes a while. When doing this type test, you don't want to disconnect the quick couplers after letting it sit overnight. Raise loader, shut engine off, remove key, set park brake, get out of tractor and disconnect. Less than 5 min time. IF it's still bleeding down, the cylinders have an internal problem. No bleed down, it's in the valve. It's that simple. I've done it thousands of times and that method is foolproof and simple.