I'm not familiar with KTM specifically, but my four bikes all vent the stator
area to the crankcase, which vents through the main breather. If you've got
water in the stator, it's other places too, likely.
No idea about the function of the hole, unless it's to return oil
to the crankcase. I'd look carefully for signs of water in other
parts of the engine.
Good luck,
bob prohaska