Originally Posted by Tomahok2
You've actually got a decent-sized bubble in there as it is, so there's nothing to worry about. But as others have mentioned, the expansion of water at the range of temperatures and volumes used in PC watercooling is rather small--if you have say 1 quart of water that ranges 10 degrees celsius, the expansion/contraction will be less than 1/2 a teaspoon. I'm not an engineer or a physicist, but I'd guess that turning your pump on and off probably puts a lot more stress on the system, and it's well within the strength of the cooling components to handle.
Silly question, but that's the res inlet on the top, and outlet on the bottom, right?