Where is the trans sensor located? In the pan, in the trans check port, trans line? Location will make a huge difference. If in the check port or output trans line, it will always show hotter than if in the pan (which is a more average temp reading). Any location on the output side of the cooler is going to show you exactly how much heat is being made by the trans but depending on your cooler, the actual trans temp could be 20-40* lower. Since TH400 trans don't have a lockup converter, they will always create a lot of heat.
One my last Jeep Cherokee, I put a trans temp in the output line to the cooler. When the trans was not locked up, it ran 190-220* but when it locked up, it would drop to 160-170*.