If the system is plumbed correctly, the hoses coming from the tops of the cylinders should be returning the "extra" oil from the tops of the cylinders to the pump reservoir when the cylinders are extended. If that's the case, then yes, the vent hole in the cap should be plugged.
I agree with the others in that the oil in the tops of the cylinders was/is also contaminated with water, and that contaminated oil was returned to the reservoir via those top hoses when you raised the loader the first time after putting the new oil in.
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