Hey Cromo,

It’s generally considered the original oil bath filter is better so if you can pick one up and you’re running the original style carb it’s worth doing.

On the pancake air filter, yes there should be a breather pipe coming from the oil filler to the pancake… this gives you warm air for your air / fuel mix and gives the crank case pressure somewhere to go. You actually need this breather open so it shouldn’t be blocked off… you should only be seeing a light film of oil if anything and you would expect to see some of this in your air filter. However if you are getting actual liquid oil coming out the top that sounds like another issue - there should be a gasket under the alternator stand that actually stops splashes coming up. If you are getting liquid oil then that might mean you have excessive crank case pressure of which I think there are a few different causes. You’re not going to want to block it off as it will only increase the pressure.

It might be the case that actually running the breather pipe, even if there is the occasional splash would not actually get all the way up to the carb anyway. Hope that helps!