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I spoke to Brian at American Diesel this morning, the breather was only fitted to the early models of the Leham engine that were marinised in Asia in the early 1970's. The "well" is supposed to be full of oil so that the wire mesh is immersed in a bath of oil.
Apparently it was found that this style of breather could cause back pressure in the crankcase and the breather wasn't installed on later models, also as mentioned fumes from the crankcase could vent to the engine space and bilges which is far from ideal. There is an alternate system in the engine to vent the crankcase to the foam covered air inlet on the engine where the fumes are fed to the pistons and emitted through the exhaust after combustion.
The recommendation is that the unit be removed and the hole be plugged.
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