David, This is really an easy fix. Starting on the driver's side of the block, the end of the tubing connects to the oil distributor. It bends around and passes through a compression fitting into the block.
It goes through the block, exiting the other side, (under the side cover) through another pressure fitting, or originally a sweated fitting.
At the fitting on the passenger side, it's bent up through a hole in the head and connects to the rocker shaft, to oil the rockers.
You can buy a kit with everything you need through Jim Carter, and others. They go for around $20.00 but include more than enough tubing, and all of the other fittings you need. The kit from Carter's has a sweated fitting on the passenger side.
Or, you can probably get everything you need to make it up yourself at a good hardware or auto parts store. I opted for the kit, as I figured I'd spend the $20 or more chasing parts.
The tubing is one solid piece, probably about 2 ft. long or so, and will need to be replaced as single unit. You want to make sure you don't make any bends until you've anchored down both sides at the block. The rest is really easy. I would suggest that once you've completed the plumbing, that you run the motor w/out the valve cover, to ensure you're getting the oil where it needs to be.
When I replaced mine, it took about 15 minutes total time. However, I didn't have the manifold in place at the time. I also found it was alot easier to work without the distributor cap in place.
As far as why it goes through the water jacket, I think Kevin was right on target. I was also told it was to help cool the oil.
I don't think I've missed anything, but if you do a search on this topic, you'll find it covered a couple of other times.
Good Luck, and let me know if I can provide you with any other information.
