mechatronic:
Your candor is admirable. It enables us all to get to the immediate problem efficiently and with understanding. We should be thanking you for the good communication.
A "spillback" is jargonese for the small percentage of a centrifugal pump's total flow that is routed back to the suction (source tank) of the pump for the purpose of ensuring that the pump has a continuous flow through it and doesn't experience a "deadhead" (blocked discharge) - where there is no flow through the pump. The spillback effect is also employed by many to contribute to flow control. It is, in reality, a partial recycle and as such is a natural (albeit, inefficient) way to control the net delivered capacity of the pump.
The merit of the spillback is that it ensures that today's mechanical seals used on centrifugal pumps stay "wet and cool" with the constantly flowing fluid through the body of the pump. As you probably know, a deadhead situation creates a stagnant fluid with a constant, high discharge pressure that is maintained at the cost of constant horsepower input to the fluid. This causes high temperatures and potential seal damage. It also sometimes causes excessive vibration which is still another mechanical no-no for a pump.
I hope this explains the effect.