I took the plunge and removed the peg board. Was not happy what I found:
Lots of wood shavings, wood dust loose screws, and most important, The black electrical box dangling loose on the wires. I think it is sensor junction box. They never attempted to secure it?
Drove to HD and bought all the parts needed to correct faulty design.
Two hours later the main work was done before it got dark. Tomorrow will cut new white peg board with slot to see the water level as someone suggested
Also will secure the box and wires.
Also, I tried to check with a flash light if the overflow fitting sticks inside the tank. It does. My guess is, about 2". Thats why we were loosing water to syphoning action.
Before and after photos below.