Chris,
Replacement of that line is a very easy and fairly inexpensive process. It does go through the block, inside of a water jacket and exits the other side.
As Old Blue Truck stated, you can get a replacement kit from Jim Carter's for around $20-$25.
To replace, you would disconnect the old line from the oil distributor, disconnect the fitting on the driver side of the block. You'll probably need to cut the old line at this point to get it back through the block.
Remove the side cover from the passenger side of the block, undo the fitting you'll find there, disconnect the fitting that goes up to the rocker arm, and you're half-way there.
To replace, you just put back the new in place of what you removed.
I believe I replaced mine in about a half-hour or so.
One last hint, it is a whole lot easier with the manifolds off of the engine.
