Hello Tom,
That metal vacuume line terminates at the modulator assembly on the passenger side of the transmission. It act on the modulator diaphram. If this diaphram goes bad the engine will suck transmission fluid up into number six cylinder causing a lot of white smoke. If I were pulling that I would be prepared to replace the diaphram, front seal and o-ring, the bushing if needed. The front transmission cover gasket may also have to be replaced if the cover is removed. The valve body bolts should also be checked for tightness. Change the filter, fluid and the cork pan qasket. Have the torque converter pressure checked for a leaky riveted hub. Examination of any debris in the pan should indicate if additional deterioration is occuring in the transmission. This transmission was also used in some 108 series sedans, 250-S, SE (1965- !967) and early versions ,280-S, SE (1967, 1968). Always unbolt the torque converter and remove it with the transmission.
Joe Alexander
Blacklick, Ohio