As Xac points out, the level is checked with the suspension on high which means that most of the oil has been pumped into the spheres, so the level in the tank is down near the bottom - there is only about 6 litres in the entire hydraulic system, at a guess I would say there is only 2 litres of that left in the tank with the suspension fully raised, and the tank can hold about 6 litres, so its only 1/3 full or less.
By design there is a good amount of leeway in the acceptable level - you can be short by a whole litre or more before you'll start to notice any problems with the warning light coming on, and even more before the function of the suspension is affected. (not that its recommended of course)
Likewise it can be overfilled by around half to one litre before you'll run into problems - the problem you'll run into in this case is that the tank will overflow messily all down the engine bay onto the ground when the suspension is fully lowered, especially if the car is parked facing up or down a slope... (ask me how I know this.
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If the level was in fact low enough for the warning light to flash on while you were driving (at normal suspension height) it would have been around 1-1.5 litres low, so its no surprise that you could pour a whole litre in and not see the disc rise off its haunches.
Checking the LHM level is a source of great bemusement and head scratching for those not familiar with it because it's checked with the suspension up which is when the level in the tank is near its minimum, the level float has a long stalk on it that reaches down near the bottom of the tank, and the total travel of the gauge is quite short, corresponding to a variation of only 0.1 - 0.2 litres. So if you're either a long way too low or too high it will be pinned to the bottom or top despite adding/removing quite a lot of oil. Rest assured that its accurate though, and when you get near to the right amount the gauge will start moving...
As Xac says a sphere may have ruptured which will consume more oil within the sphere body than normal making the level drop, but not by as much as you describe, unless a whole bunch of them went... If you haven't checked the level since buying it, its quite possible that it was simply filled to the wrong level by the previous owner - they might have filled it at normal ride height instead of fully up for example. (Pah! who needs to read owners handbooks to top up fluid levels!
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Now that you've got it topped up to the correct level check it once a week and see if it changes (remember to check on level ground) and if you see a steady loss but no sign of it on the ground it could be the brake doseur valve leaking oil under the drivers carpet, but my guess is the level will be stable. You may notice a slight variation in level with temperature (oil expands with heat after all) but otherwise the level should be pretty stable from week to week. Unless you're cracking open the hydraulic system (changing spheres, disconnecting pipes etc) then there shouldn't really be any loss of oil at all, except for a very gradual apparent loss over a year or more as the spheres lose their gas pressure allowing a greater percentage of the system oil to sit in the spheres.
Finally be aware that there are two different things that trigger the hydraulic warning light on the dashboard. One is low oil level in the tank - there is a bronze disc in the bottom of the level float with a pair of contacts and a couple of wires going to it - this turns the light on if the disc rests at the bottom, which it should never do in normal circumstances as it will be pinned to the top at normal ride height with normal oil levels, and at most come down to half way with the suspension right up.
The other thing that will trigger it is low hydraulic pressure at the pressure regulator. Normal system pressure is 2400-2700 psi, if that drops below around 1000-1200 psi a pressure switch will turn the warning light on. This is what causes the light to be on for a few seconds when you start the car in the morning - after the light goes out the pressure has climbed to at least 1200 psi which means there is enough pressure for the brakes to work safely, and its typically just below the pressure where the car will start to lift.
If you lower the suspension completely for a minute or two, then put it straight into full height, its normal for the light to come on for up to 30 seconds or so as you describe, because the sudden demand for oil from the now empty and depressurised suspension will cause the system pressure to temporarily drop below 1000 psi until the pump catches up and re-pressurises the suspension. Nothing to worry about there.
Its a shame that both faults trigger the same indicator light as the severity of them is very different. If its the tank level being low causing it to flick on while driving its a "check the level next time you stop, preferably soon" type of problem, but if its due to low system pressure whilst driving its a case of "PULL OVER RIGHT NOW!", as its some sort of catastrophic system failure like a snapped auxiliary belt or a major high pressure leak
(Of course even with complete failure of the front brakes the rear brakes and handbrake will still work)
In the latter case the light would just come on and stay on mind you, whereas a marginally low tank level will tend to cause the light to flicker on and off as you corner, at least at first.
LHM is dirt cheap, I carry a 1 litre bottle in the boot at all times in case of emergency, but in many years of driving Citroen's I've never had an on the road hydraulic leak or loss of main system pressure. (Oh boy am I asking for it saying something like that!
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