Is the water pump on the car original to it, or has it been replaced? If it's original, it may have open bearings that the oil can get into, but if it's been replaced any time beyond the 1970s, it likely uses sealed bearings and the hole is just a vent.

More importantly, if the water pump is making enough noise to hear it over the engine, it's probably due replacement!

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Current stable:
1995 E320 149K (Nancy)
1983 500SL 120K (SLoL)

Black Sheep:
1985 524TD 167K (TotalDumpster™)

Gone but not forgotten:
1986 300SDL (RIP)
1991 350SD
1991 560SEL
1990 560SEL
1986 500SEL Euro (Rusted to nothing at 47K!)