Where is this drilled oil passage? Is it visible without teardown?
It is a large diameter passage that's drilled the entire length of the block front to rear through all the lifter bores. It's about 1/2" in diameter, I believe. You'll need to remove the pushrod side cover and at least one lifter, and use a bright light and an inspection mirror to look into the bore to see it. I don't recall ever seeing an American made 261 block with the hydraulic lifter passage, since they were medium duty truck engines, and all of them I've seen ran solid lifter cams. The Pontiac 261 engines used in Canada ran hydraulics.
Jerry