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Just read Eric79's thread but didn't want to hijack:
That connection at the side of the water pump connects to the heater and then returns from there to the engine ???
When I boght my '79 the previous owner had bypassed the heater core because it leaked, I reconnected the hose just like it was --> it worked, why change it ??
It seems that both connections can be plugged and I can get rid of that hose (see pic) ??????
As far as I know it's safe to plug. Many of the TPI and TBI water pumps have that bypass plugged anyway, and the coolant to the core went from the manifold. There may be a small risk to your cooling ability, but you can always route the hose again if the plugging creates an over heating problem.