Does anyone know why this pipe plug may have been installed in this 742 case?
The diff was rebuilt with a Detroit Locker and 3.91 gears at some point.

Looks like it would raise the fluid level a fair bit.

temp gauge ??

most electric temperature gauges i have seen use 1/8" pipe threads for the sender.
that plug looks like maybe 3/8 pipe ?
maybe the sender was too close to the pinion shaft, so a bigger pipe thread was used to move the sender away [more clearance] by using a reducer bushing ?
just tossing this out there, ASSuming an electric gauge being used instead of a mechanical one............

I thought maybe an RPM sensor that was triggered by the pinon teeth but is it too far forward for that?

What’s the casting number and date on the housing.

Could the splines trigger a sensor?

Don't ask how, but I've seen the square twisted right off on the fill plug and then you can't get it out without welding.

Maybe that happened in it's past life, the new fill plug got installed, and later it was repaired properly?

Aux oil cooler somehow? Can't say temp sender because the probe would barely get a proper reading there.

Nascar 8 3/4 used Detroit Lockers.

Maybe a port for a rear end oil cooler.

Probably if they are exposed in that area.

I could see that being a return line with the supply line off the axle housing.

Yeah, I mentioned that above, but: too much crap to fall off of a car with little gain unless it's a balls to the wall road racing effort. If so, better off with the Aluminum 8.75 assembly as it would dissipate heat just as well, is lighter, and more reliable with no pump, lines, or heat exchanger to get knocked off the car.

Winner !