A 3/64" hole is pretty small. Certainly it will eliminate those pesty air locks when filling the system but the bypass flow is not significant. Consider that flow is a function of cross sectional area. It takes 7, 3/64" holes to equal 1, 1/8" hole or 16, 3/64" holes to equal 1, 3/16" hole on a cross sectional area basis.
Yes, covering the radiator in cold weather is a good idea. I run my 8N with a piece of cardboard that covers most of the radiator. Of course the cardboard comes out as soon as the weather warms and for heavy work.