I put the question out on the intrawebs and got a positive response. The hole in the transmission was designed to be there to let the fluid drain back. This was a massive relief.
Today I was finally able to install the engine. It would be an understatement to anyone who has never installed an engine to say it was easy, but it would be an exaggeration to anyone that has put an engine in a car to say that it was hard. There were difficulties and problems to be solved as there are with any engine installation, but relative to installing an engine in general, it went pretty smooth.
First I had to check a cylinder through the spark plug hole. A while back one of the pieces of tape that I used to plug the spark plug holes for painting disappeared. I made the pieces cone shaped around the end of my finger, so I didn't see how it could have fallen in, but I wanted to make 100% sure it wasn't in there. Fortunately it wasn't. This involved mounting the front pulley so I could turn the engine over. Then I moved the engine on it's long journey to the front of the car. This was actually more frightening than it sounds. There was so much weight on the old engine stand you could see the strain and any movement would cause a slight bouncing up and down. It felt that at any second it was going to break and try to crush my foot. The worst scare was pushing it over the lip in the garage. It's quite a jolt for so much weight.
Next was getting the engine onto the hoist and off the stand. Pulling the stand off of the engine mount was also something that proved to be fairly difficult this time around.
After getting the torque converter securely pushed back into the transmission I installed the flywheel, remembering to put the shim back in place behind it so the starter will line up.
I had forgotten that when I removed the engine I had to jack the car up because the lower control arms block the legs of the hoist from sliding under the car.
This meant that the transmission was too high for my little jack to reach so I had to use the large jack. Later, I would have to use several blocks of wood to get the small jack to contact the engine to give it a nudge in the right direction. Fortunately my neighbor Craig was walking by right as I was beginning to sit the engine in. He stopped by to check the progress and helped me guide the behemoth into place so I could start the top two bell housing bolts. I was very thankful he stopped by because the engine was sitting sideways and at an angle as it dangled from the hoist. It would have been very difficult to twist and pull on the engine while started the first couple of bolts. I tried to hurry because I know he likes to keep his heart rate up while walking.
After getting a few of the bell housing bolts started I lowered the engine hoist and the transmission jack. The passenger side motor mount made contact so I got it mounted first. It went in with surprising ease. The driver side took a bit more work, but compared to how much trouble these can be, it was fairly simple. When I was able to run a phillips head screwdriver through the holes I knew I was very close. The mounts have two tabs with a nut welded to one end. Fortunately I thought to test fit the long motor mount bolt before I tried to install the engine. The tabs on both mounts were not lined up properly and it took some time with the vice to get them bent to a position that would allow the bolt to go through the first tab and screw into the nut on the other side without cross-threading.
I had rotated the flywheel to match the position of the torque converter to help pre-align the bolts. I was off by about two millimeters. It was very close but the bolts wouldn't start, but it didn't take a lot to get it where it needed to be. After getting the converter tightened up I finished the bell housing and motor mount bolts, making sure to tighten them in a series and double checking everything after they all finally tightened up for the last time.
And she's finally home. I hope she stays there for a very, very long time.
I also found out today that the guy who ordered the headliner and was going to install it died of a sudden heart attack last week, so I will have to find another upholstery shop.