Somebody with some knowledge of fluid dynamics can probably explain this better than me, but going from a 1/8" NPT fitting to a 3/8 line would rob the oil flow - plenty of pressure but restricted volume. You don't want anything to interrupt flow of oil to the bearings. When GM designed the 261 remote full-flow system they made the fittings larger, because the spin-on elements flow a lot more oil than the bypass system was designed for.
