What is this and why would it be there?

If you are shooting for a real 450 hp motor I would consider that borderline for that block. I would still use it. Its not like you are taking a chance on say a valve spring. Which could destroy a bunch of other parts. If it leaks it can toast the bearings and maybe the crank.
I may have not been clear. I have the numbers matching motor that I'm going to move forward with after it's been inspected to make sure it's solid. What's a good receipe for a solid street motor?