The steam holes are there to vent steam bubbles from the cylinder walls during warm-up.
Especially during cold temperatures, when the coolant is very cold, localized hot spots can form these bubbles.
Kind of works together with the original 261 bypass thermostat, that circulates the coolant through both head and block before the thermostat opens.
I heard that was more common with bigger truck engines, like the 261 originally was.
