Is my 2.7 shagged?

I believe its a drain out port that serves 2 purposes.

1. to allow unrestricted flow of air on a new filter to let the pump prime up faster during an oil change
2, to allow controlled draining of the housing after shut down so you dont make a mess while servicing

But, and I could be wrong,

the pressure issue that is caused by not installing the filter correctly is from this port being open and the filter not being seated correctly the majority of the flow vanishes back to crank case rather than into the lube system.

Hi Ranga,
I was wondering how you went with your engine problem. I it sorted?