Need help with hang on overflow

I have always had a problem with my hang overflow unit. The siphon
always gets an air bubble in it and eventually gets big enough that
the siphon is in danger of breaking and the water level in the tank
gets very high.

While tinkering around today, I noticed that if I remove the overflow
part of the box that sits inside the tank that the air bubble
dissapears and the water flow greatly increases. Anyone have any idea
what this means and does it give any hints as to a possible fix.

Does it mean that the overflow box is too small? I have used over
flows before and I just don't know why this one is giving me this
problem.