Bill,

Are you referring to a 1-qt full flow factory oil filter on a 1961 Jobmaster 261?
1961 and 1960 would have been the same 2-qt full-flow filter capacity.

People have reported reported using a by-pass 1-qt filter on a 58-63 261. They had the "plug" in the inflow port in the block still in place (not yet moved out of the way for use of a full-flow filter.

If possible, would you post a photo of the head and canister on our oil filter?