Is it a bypass canister?
When I was cleaning mine up before installing on my 261, a fellow Stovebolt member took the top off the canister and showed me a very small pinhole at the top of the center "tube" inside the canister. It is the drain hole that the oil runs through to drain back down into the crankcase. If it's plugged up, the oil won't drain. Might be worth a check.
I used carb cleaner and a small pipe cleaner to scrub clean, and use a rifle cleaning kit to clean the inside of the tube before using. Worked pretty well.
This thread has a couple of pictures that show it...
https://www.chevytalk.org/fusionbb/showtopic.php?tid/323505/ 
