The belly pump reservoir is supposed to be vented when used with one-way cylinders. The hole in the cap is normal.
When one way cylinders extend, they suck oil from the reservoir, and air has to get in. As they retract, the oil gets pushed back into the reservoir and the air has to get back out.
If oil's squirting out, it's because you have too much oil in the reservoir. Only fill the reservoir with the loader completely lowered, to avoid overfilling.
Your hydraulic control has three positions, raise, hold, and lower. Being a 60-70 year old tractor, the hydraulic control valve is probably VERY worn, and you may not be getting it 100% in the hold position. It may also be leaking internally. This may be why the loader leaks down over time.
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Today's Featured Article - Oil Bath Air Filters - by Chris Pratt. Some of us grew up thinking that an air filter was a paper thing that allowed air to pass while trapping dirt particles of a particles of a certain size. What a surprise to open up your first old tractor's air filter case and find a can that appears to be filled with the scrap metal swept from around a machine shop metal lathe. To top that off, you have a cup with oil in it ("why would you want to lubricate your carburetor?"). On closer examination (and some reading in a AC D-14 service manual), I found out that this is a pretty ingenious method of cleaning the air in the tractor's intake tract.
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