23jayhawk,
The hole is an atmospheric drain or vent to keep coolant from getting into the gear box if the mechanical "water pump" seal leaks.
If you see coolant dripping from this hole, the water pump seal is probable going bad. Any overpressure in the cooling system is released through the radiator cap into the over flow bottle.
Also if you were to see oil dripping from this hole, that would indicate that the water pump drive shaft seal is bad (this seal is a rubber lipped type and seals the gear box oil)