The oil gets filtered either way it flows, but the conventional wisdom is to make the outside of the filter media the "dirty" side, with "clean" oil coming out of the bottom of the filter canister. The orfice is there to control the flow of oil through the filter and prevent pressure loss to the rest of the engine. A bypass filter is in parallel to the lube oil flow, and the filter outlet just dumps back into the oil pan. If too much oil volume flows through the filter circuit, the bearings and other pressure-lubed parts get starved for oil pressure. Definitely DO NOT increase the size of the restrictor, and if you've got a tired old engine that's a bit short on oil pressure, it might be wise to make the hole in the filter outlet smaller. I use Holley carburetor main jets for that purpose, as I've got a box full of them for adjusting mixture on the race engines.
Jerry
