Fox, ditto everything Tom said. Here is a link to Deve's 261 website that explains this subject well.
http://devestechnet.com/Home/TheVenerable261The oil flow 'dowel' (described in Deve's above article) sounds like it is positioned 'out' for bypass. It can be pushed 'in' if you want full flow.
I'll probably get some rocks thrown at me for the idea below, but here goes...
There is another option if you go full flow. You can easily plumb the system with both a full flow spin-on filter and your 216 canister bypass filter. All oil goes through the full flow filtered circuit all of the time, then a small percentage of the oil leaves the full flow filter and heads to the bypass filter before it gets returned to the crankcase.
Why? To quote Hotrod Lincoln, the spin-on filter "catches rocks and marbles" while the bypass filter removes the smaller particles. The filters have different size screens. The dual filter system should give your engine cleaner oil all of the time than either single filter system.
Your 216 bypass filter works for dual filter design because of the 1/16" restrictor orifice inside the canister.
Overkill? Maybe. But, hey, it's a hobby. Either single filter system will work fine and has been proven through the years. But the 261 is configured to easily combine the two to get the best of both.
I'm building a 261 and have plumbed it for the dual filters with Hotrod Lincoln's help. It is still in the build stage, so I can't provide any operating testimonial. Be happy to provide pictures of the set up if anyone is interested.
Matt
