The hole is in the screen assembly in the regulator block. I see the 400 parts books call it a regulator valve, later tractors called the same type of valve an unloader valve.
I'm sure you know that the hydraulic system is a closed center system but uses a pump like the open center systems. To make it work there is an regulator valve that drops the hydraulic pressure to a standby pressure to about 60 PSI. The little spring behind the regulator valve pushes the valve open. Hydraulic pressure on the other side of the valve, which is more than the spring pressure, pushes it closed and the pressure will rise until the safety (relief) valve opens. There is an orifice and screen assembly in a passage that runs from the pump side of the valve to the spring side. This orifice allows oil to flow through to make the hydraulic pressure equal on both sides of the valve. Since the pressure is the same, the spring is enough to push the valve open to dump the oil flow back to reservoir. To make the regulator valve close and cause the hydraulic pressure to rise there is a passage from the spring side of the regulator valve that goes to each spool in the auxiliary valves. In the neutral position this passage is blocked off in each valve allowing the regulator valve to stay open. When the auxiliary valve is moved to a demand position, the spool is moved to allow the oil in this passage to dump to reservoir. Since the spool will dump more oil than the orifice will allow through, the hydraulic pressure on the spring side of the regulator drops and the valve is pushed hydraulically against the spring to the closed position. Oil pressure rises in the system to the level needed to move an attached cylinder or open the safety valve, which ever is less.
Since the auxiliary valves are spool type valves there is some leakage past the lands in the control circuit. As long as this leakage is less than the amount that the orifice will allow through, the regulator valve will function to put the system in standby pressure mode. If the orifice screen becomes restricted or plugged not enough oil will flow through and the system will remain on high pressure. Excessive leakage past the auxiliary valve spools will also cause the system to stay on high pressure.
Since you would be going from three spools to six it is quite possible that the leakage will be more than the orifice will allow through and the system would stay on high pressure. Worn valves can be compensated for by enlarging the orifice hole in the screen assembly to allow more oil through. The down side is that any oil that is going through the orifice is not available to the auxiliary valves to do work.
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