I would just go ahead and run a 5/16 inch hose from the vent on the transmission up there to behind the intake or even on the firewall like 99% of all automatic transmissions. And I think just about every auto parts store has a little plastic cap that goes on the end of the hose, sort of a rain shield.

Dorman 14689 Automatic Transmission Case Vent Compatible with Select Models https://a.co/d/9sQfx7l

lol, keep in mind that if you don't put a t fitting in it with a water drain going down to the top back of the transfer case.. then if you ever get involved fording a creek and the water reaches your center console, the water won't drain that enters the vent tube but will go into the transmission. Now how many of us are going through water that deep? How many of us would even want to?

it seems rather obvious there's nothing else back there that needs a vent. I'm thinking the guy at the dealer was correct in his Theory. I have an additional Theory. That originally that vent hose which tee"s off to the transfer case was the original design to vent both the transmission and the transfer case. I'm thinking somewhere on the assembly line a duplicate event was created for the transfer case by itself, leaving the loose end not needed. I read that the H2 went from the drawing board to production in 10 months. With such a short time frame I could see that sort of error happening.

 

If 2007 they corrected it and went to the two individual events without the empty line to the top of the transfer case, that would suggest it took them that long to realize the error. Because if it was to allow water to run out without going in the transmission, no doubt they would have left it that way after 2007