NITROUSN, I think you nailed it. He inspected further and was able to determine it's actually coming from the bellhousing area. He had a reference picture of the back of the engine before he installed it and it's the style with the two threaded plugs, it doesn't look like either has thread sealant on them.

I offered to help him pull the cast iron Torqueflite out to get to it, will go visit him next month.

Cab- thanks for the info. This is a stock rebuild, but it's a 300D so it has the solid lifter cam, adjustable rockers, and dual Carters on it. I doubt he'll be hot rodding it around much!