It's a combination drain hole and flush hole.
It's a drain hole because we need to drain the water from below the nozzle turret so it doesn't push up on the nozzle turret in freezing climates.
It’s a flush hole because when the head retracts, water and is flushed out of the hole, forcing debris from the area below the nozzle turret.
NOTE: Clear model used for demonstration purposes.
It's likely the rotor leaks water because of the "drool" from the nozzle. As the screw diffuses the stream, a little of the water runs down the front of the nozzle turret and into the open area, and it then drains out of the hole in the riser. To prevent it from happening, simply back off the radius reduction screw so it doesn't diffuse the nozzle so much. If the water comes out of the hole in a "stream-like" manner, then it's likely that one of the internal seals is contaminated with debris, so the head will likely need to be replaced.