That is the hole for the road draft tube (or the hole for the sealed tube for use with the factory PCV system).
That hole is found in all 216/235/261 engines.
That expansion plug, "freeze plug" (block casting hole plug =
core plug, or Welsh Plug where you live) is a cob-job part (most likely in an attempt to put together a home-made PCV system).
If it is simply a plug for the hole, and there is no lower-engine breather, I'd drop the pan and check inside the engine.