yes the hole is for power take off...
302v8..will fit in the narrow without cutting the tub..tight though..
I like the 302 in the narrow,have had 3........on the same breath..if it had a good flathead ..i'd leave it alone.
...and if it has a 300 i'd not change....the 300 six is a lttle heavier motor,makes up for it though with torque,as it is way more powerful on bottom end.
kpm