Its simple, oil is either leaking back thru the control valve, or thru a relief or other componet, or you have a leaking hose or fitting or shaft seal.In other words, the oil has to be going somewhere, you just have'nt found the where yet.
There is also the possibility that the cyl was forced outward under load, which would shear the oil and cause foaming. The vacuum created by forceing the cyl to extend by external means, (your jack), has sheared the air molecules out of the oil. You cyl now can recompress that air as it ties to retract under load and this would allow the cyl to "drift", how much would depend on how much shear was created. At no point would the cyl retract any more than the point that the shear was created, and it would be very difficult to even reach that point.
I did not read what Problem the Op had. When the thread was started it was about swapping current engine to a pressure washer engine. He wasnt having a hyd problem. When I checked back in, he had already fixed his problems so I had no reason to comment. I did feel it necessary to respond to one of your comments, which I knew to be wrong. I think if you will consider what I, and NSMaple, have said, read the link I provided, and if not convinced, then do a little more research, you will realize what we are saying is true.