The hole was drilled to confuse the Germans. Should the motors fall in to enemy hands, it was figured they'd spend so much time trying to work out what it was for, it would distract them from their plans to conquer the world
It does make you wonder why you would do anything to reduce cooling on something used in a military application where use and abuse is likely to be the norm and any refinements and possible emissions benefits would hardly be of priority, heck with a 8:1 fuel ratio and 30 weight oil they probably provided their own smoke screen.
In their prime in the 70's Seagull were reputed to be selling 80,000 motors a year, it would be interesting to compare this to how many they sold in 1991. In the 70's on the Welsh coast, at least where we boated, they were by far the most common type of motor to be seen as an auxiliary on pocket cruisers etc. They must have had a big share of this part of the market, but they had no other offerings in larger hp's so their overall sales would have been hit accordingly. It seems a lot of the other brands had the benefit of the huge US market as well, which again Seagull could not really compete in due to only having small hp motors whose positive benefits would be less valuable when so much boating is done on lakes etc. Here in UT it seems like a 9.9hp motor is considered a small trolling motor and is seen as a secondary motor on the back of many boats of about 20' in length (rather over the top to my mind) - with the bigger is best attitude there must have been relatively few who would have given any Seagull a second glance, other than sailboat owners on the coasts. I guess in the end Seagull had a limited range which ended up appealing to only a certain kind of mindset and so were destined to end up with production volumes that would increasingly have made them less economic to produce, resulting in prices that would only double down on the problems. It seemed to me in the circle of people I knew in the 70's that when motors of what might be termed the modern style started to gain a hold and people found they could zip round in their little tenders etc. at much greater speeds than previously ever imagined, the smaller Seagulls quickly lost their market. I remember a local dealer selling Archimedes Penta motors seemed to clean up pretty quickly, when people saw what their 3.9 motor or the 4 horse motor could do on a small dinghy - somehow people went from being happy just "putting" a long on the water, to the need for speed.