Re: 1972 Mercury Thunderbolt 500 Help Needed
That hole is a drain hole to allow water to drain and prevent possible rupture of the case from freezing. The fact that you are seeing oil there indicates oil leakage through the shift shaft seal.
You haven't provided your engine s/n but if you are sure it is a 1972, here is the parts list:
MERC 500 - Mercury, Mercruiser, Force, etc. Parts Lookup
For the shift shaft seal, see item 40 GEAR HOUSING ASSEMBLY, COMPLETE (PAGE 1) which contains the seal, item 41.
You can verify this by dropping the lower unit and looking for evidence of oil.
It may also be the seals, items 16/17 under the base of the water pump but dropping the LU will help to narrow it down.
Gerry