Mike,
If memory serves me correctly that hole in the block is "for nada". For nada thing! I think it's a blind hole and doesn't go thru to anything.
As for the "Y"s, their purpose it to be in the system such that when both valves are closed, water still circulates thru the water pump---intake manifold so that air bubbles do not form and cause catastrophic cavitation! Don't ask how I know this.......
Not a terribly graceful design, more water than actually needed to do the job.....but even with the larger diameter, when the valves are open, enough water does circulate thru the heater core to get the job done! After all, the cabin is so small you can heat it with a cup of coffee!!!
It is good to see that the valves are back in production! When I wanted them.....not the case! So I put mine all back together with "T"s that allowed for a 3/8" cross couple hose (for the cavitation issue) and put 1/4 turn ball shut off valves up on top of the center spine behind the dash. Left the RH valve open just a crack, and put the other one on the LH side where I could just reach it to turn it on/off while in the driver's seat! It didn't take much flow to work very well, and the small 3/8" bypass hose did it's job also. NEVER had another cooling problem after that was all sorted out!
Cheers!
Steve