That little plastic thingy you refer to is the trans breather vent. What you saw come out was probably some sort of filter material to separate the trans fluid from the air.
I'm pretty sure that shouldn't have happened and that it does need to be in there. IMHO, you have 2 options. First, drill and tap the hole on the outside for an NPT pipe plug and relocate the vent or, Call John Cope and see what he recommends you do about a replacement breather.
