I think it depends on where your temp sensor is located. Here is a guide I have always used. My sensor is between transmission and cooler, so basically just out of torque converter and I have seen 260 before.
Automatic Transmissions
OIL TEMPERATURE MEASURED AT CONVERTER OUTLET TO COOLER:
300° F=
The maximum allowable temperature. This is the recommended place to install a temperature gauge or sensor. Do not allow the converter outlet temperature to exceed 300° F. The temperature at this location will vary significantly because of load, hill climbing, etceteras. If the temperature reaches 300° F, reduce throttle. To lower transmission temperature with transmission in neutral, run the engine at 1,200 RPM for at least 2 - 3 minutes while keeping a close check for signs of engine overheating. A transmission in a heavy throttle, stall condition (a typical situation is rocking a vehicle stuck in mud, sand, or snow), may increase temperature at a rate of 1° degree per second of stall.
OIL TEMPERATURE MEASURED AT OIL PAN OR SUMP:
150° F=
The minimum operating temperature. Note: It is possible in low ambient temperatures to overcool the transmission with auxiliary oil to air coolers. Oil to water coolers in standard factory radiators will normally not overcool a transmission.
175-200° F=
Normal pan oil temperature operating range.
275° F=
Maximum allowable oil pan temperature for short durations during long hill climbs.
300° F=
Damage occurs to internal transmission parts, including warpage of metal parts, degradation of clutches, and melting of seals. Transmission oil oxidizes, (forming varnish-like substances causing further clutch slippage and compounding heat build up) and transmission oil life is extremely short.
