1. The water level of the inner container relative to the bottom of the outer container never changes.
2. The water level of the outer container relative to the bottom of the outer container is also amlost constant (its raises very slowly, and only because of the walls of the inner container).
3. Its true, that the outlet must be lower than the water level in the outer container, but they can be connected via a fixed pipe(see my original design). To start the siphon (ie. fill the pipe with water), see my 2nd design (the one with two valves).

I will make a 3d design when i have some time.

I know its hard to believe, but its true.