Just remove the garden hose and let the clutch cover vent to atmosphere. I've had a lot of these things and Minis and I've never seen that vent connected to anything. Some of them don't even have a vent, just a place where the hole in the casting never got cut out. Look at a few others, especially later Minis, and you'll see what I mean. Even having a squiz at engine bay pix on trademe should tell you something.
As to the rust in the cooling system you must remember that the car is nearly 43 years old and it is going to have a lot of shit in there no matter how well it has been maintained. That said it does look like you have found a good one. It looks a lot better than my Wolseley.
The first thing to look at when you suspect a blown head gasket is the oil. If it has water in it you will notice immediately as the oil will be milky grey rather than black. Being a push-rod motor replacing the head gasket is dead easy. While you've got the head off have a look at the bores and the valves, rockers, etc.
You may be interested to know that BMC 1800 valve springs fit these. They are the same external diameter but have heavier coils. I belive that this makes them a valid alternative to Cooper S double springs. I used one once when I broke a valve spring. Should have changed all of them at the same time. Means you can rev it harder before it starts to valve bounce.
There is tremendous devlopment potential in these motors. I knew a guy in the '80s who had one just a bit hotter than Cooper S spec and it blew away a lot of V8s. Looked stock as a rock just like yours but was good for 105 mph.
Early Toyota Starlet 12" rims fit these things too. I know this because I bought some with good tyres on them thinking that I would need to swap the tyres onto my BMC rims but found that the stud pattern was the same and they fitted.
Good luck with your project. Mowogs Rock.