I think you will find that the shaft seal has worn, allowing coolant to pass from the pump body and the bearings to escape from the hole you mention (there is always a hole there, otherwise the water would come out at the front bearing and the pulley and fan would throw it everywhere!)
If you "waggle" the fan blades back and forth (same way you would check for wheel bearing play) you will probably find appreciable movement and also be able to produce a "clonk". You may need to loosen the fan belt to do this.
Wear on the water pump bearings is the usual cause of your problem. Looks like you need to replace your water pump, as the above check only confirms wear.
Mr. Toad, November 2008
