The thermistor is meant to sit inside the smoke wadding and as this funnel sits above the PCB under which the thermistor is mounted, I can't see that there needs to be a hole to allow for it. But there might be something else on the top of the PCB that the hole is meant to accommodate.
Anyway, I concur that @Alex M is a superb repairer of even the most elaborate Lionel engines and I hope he will comment on this issue.