Andy (the Dorset one),
The oil bypass mod is a must-do for high performance engines.
A 911 oil pump is a geared positive displacement type which means that it produces the same flow no matter what. The oil pressure presses against a piston with a calibrated spring behind it, and when the pressure reaches a preset level it overcomes the spring and moves the piston, which uncovers a relief port which vents oil back to the engine sump. If the pressure falls the piston covers the port back up, allowing pressure to build.
In the original 901 engine this excess pressure was vented into the crankcase. As a result, the engine ran with a fair amount of oil in the bottom of the case with the resultant windage and aeration of the oil. So in 1976 the factory changed the design and vented the excess pressure into the INLET for the pressure side of the pump. This reduced the oil level in the case, which allowed Porsche to make the pressure side of the pump larger.
All detailed here:
http://forums.pelicanparts.com/showthread.php?t=360465&highlight=oil+bypass+modification