The "steam" holes actually flow coolant- - - -once it turns to steam, you've got a major overheating problem going on. 261 cylinder bores are so big that the cylinders are cast in three groups of two, with a "figure eight" shape- - - -no room between them for coolant to get all the way around the cylinders. To promote good coolant flow, the block and the head has three pairs of 3/16" holes drilled to allow coolant to flow vertically from the block to the head, and improve the cooling along where the siamesed cylinders join up. The small block 400 V8 engine is made the same way, and has the same kind of coolant holes drilled in the block and the head. If you put a 235 passenger car or truck head on a 261, regardless of the casting number, you'll need to drill the coolant flow holes, using a 261 head gasket as a drilling template. The holes are also drilled at a slight angle- - - -not straight into the gasket surface of the head- - - -12 degrees, I believe. There's a tech tip on this site somewhere that shows a cutaway of a 261 head, showing where and at what angle to drill the coolant passages.
Jerry
