The flash point of Dexron 3 is 400 degrees Fahrenheit. I'm going to assume its a glitch. You probably have an intermittent bad sensor or possibly a wiring issue on that circuit. It could also be a poor connection at the sensor if you're lucky.
Edit: I'm running a Tru-Cool 4589 on my 2000 and monitor trans temp via Ultra-Gauge. I have yet to get over 190 degrees. City driving is definitely higher temps than highway driving. Mine is mounted on the passenger side of the condenser with the pass through zip ties that came with it. FYI there is a thermostatic bypass (functions similar to a thermostat) built into this model. I'm entirely bypassing the radiator.