I replaced my t-stat without drilling a hole and had a real pig of a time bleeding the cooling system. Shortly afterwards I replaced the t-stat housing, and while it was out I drilled the t-stat flange. Bleeding the system is much easier now.

The idea of the hole, which is drilled through the t-stat flange at the highest point, is to allow air to pass through the hole to make bleeding easier. Otherwise, air can be trapped behind the t-stat until it opens, which takes about a week in the case of my car when it's just idling in the driveway. The 1/8 inch hole doesn't seem to affect t-stat performance.