oil leaking fom top of breather
Did you have your case underwater? The oil is only supposed to be a little less than half full in the case. Check out what the breather is supposed to look like from a slide at the toyota parts counter. Then it might make more sense to you. I can't imagine that it is a open "little" hole, most likely some sort of hard (metal?) filter inside of the breather. If oil is lighter than water, and you had the vehicle in enough water, I suppose you could get enough in, but that doesn't make sense either. When I was a young man, I used to take my Dodge power wagon through all kinds of strams, ponds, never realizing that I didn't have a hose connected to the brather that had the breather way above any potential water line. As a result, my xfer case had a muddy mixture of oil and water, but it never was nearly enough to lift the oil out the top. Are you missing a breather hose connection?