The lystery line is just what ttodd says, to run oil to the rockers. It is not original equipment, probably added by a po because the oil fed got pugged up due to lack of maintainance.
The oil filter does go to the 2 ports circled. Note that the mystery line is hooked to the back one. That port is the pressure feed for the filter. The other port is the return, and dumps back into the pan.
If you're going to overhaul the engine, I would suggest getting rid of the mystery line, as it is unecessary, then add a filter to prevent the oil feed from getting plugged in the future.
