It will use the collateral to buy BitGOLD at the price feed or up to 10% above.
No, it shouldn't. That is only for margin called covers not expired covers. Expired covers should buy up to the price feed but no higher. If there are not enough sells at (or below) the price feed to cover the debt, it will just sit at the price feed (with the locked BTS collateral) until it is fully covered.
mdj, if you have enough BTS left over (outside of the collateral) then you can self-short again and use the BitGold to cover your old short (effectively rolling over the short). It would be smart to do this now rather than waiting for expiration if you believe the price of BTS will further fall (relative to gold) from its current price by the time the short expires. If you are hopeful that it will go up by then, then I would wait until expiration time. At that point, if there are not enough BitGold sell orders at or below the price feed and you are eager to get back your BTS (even if it is at a loss) then you can match the expired cover with a new short (assuming you have enough BTS to short sell enough BitGold to fully match the expired cover).