That there's the fuel pump, and the 3" tube is a mystery to me - I'm looking at an old pump of mine right now and there's a tiny hole almost in the middle of the tube going down into the pump, I'm not sure if it's some sort of pressure valve. There is no threading, and I don't have anything attached to either side, just the line in and out on the bottom of the pump like yours.
Hopefully one of the gurus knows for sure if it's some sort of vent, but likely something has given up inside and you're not going to be able to service it, it's a sealed unit.
Here's a link to one of the pumps at JEGS...
http://www.jegs.com/i/JEGS-Per...rentProductId=759861
I know Holley and others make versions, it's a matter of deciding your budget and then whether you want to stick with mechanical or go electric.
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