You are misunderstanding the purpose of some of the hot water system controls so an explanation of the way to consider and adjust them will help. Your understanding of the release of water due to expansion when heated is correct.
The differential on your Honeywell controller does not adjust the water pressure, it adjusts the temperature at which the boiler will fire again after the boiler has reached its maximum temperature as permitted by the other setting of the same controller. In another way of say this, when the water reaches the maximum temperature setting of the controller to turn the burner off, the differential you are adjusting permits the burner to go on again after dropping the 15 degrees you set.
Unless the boiler relief valve actually has the 40 psig setting stamped on the valve tag, your pressure should not reach 40 psig. Most residential hot water relief valves have a setting of 30 psig and that number is stamped on the tag. So if your boiler is reaching 40 psig with a 30 psig relief valve – install a new one.
Frequently, after a boiler burner stops firing and the circulator stops, the water temperature in the boiler rises due to residual heat in the cast-iron heat exchange surface. This can be stopped by opening the zone valve that regulates the temperature of a zone that usually needs heat, such as a bathroom, child’s bedroom, etc, and wiring the circulator to run constantly. This way the heat that would cause the boiler to rise will be transfered out of the boiler to provide useful heat.
Another possibility, if the heat will remain comfortable is to lower the high limit to 190F and leave the differential about 15 to 20F. This way the heat will start out lower to rise less.
It is quite safe to leave the makeup water isolated. In fact, the manufacturer places a tag on the reducing valve instructing people to do so. It is more damaging to have water running continuously from a broken pipe to cause damage. If you worry about not having water in the boiler, worry about leaks and not having a low water cutoff installed to shut the burner off if the water level drops.
Lower the final water temperature and get a better relief valve and the dumping of water will stop. If you want to make sure, install a larger expansion tank.
You can find other information at the free lessons at http://www.hydronic.net