Last question first - no, K&N oil is made special for the surgical gauge that K&N filters are made from. It's not designed for nor recommended for foam filters. Use a dedicated foam filter oil if you like, or just motor oil as I mentioned earlier. For our pods, we use a 50-50 mix of motor oil and gas. I use an old 1" paint brush and just lightly brush the outside of the filter all the way around. Then I let it sit 10 or 15 minutes, rotating it end for end a couple times, to let the oil soak in. You don't need or want to super soak them, just a light coating is fine. It will spread throughout the foam as the filter sits. You really can't over-oil them. The extra will just work its way to the bottom of the filter eventually and drip out, or will get sucked in through the motor. They sort of properly oil themselves once put into service. The excess comes out, leaving the right amount to aid in filtering.
Your breather housing should be the same as the '78 model, but may be plumbed differently. You may have one of the outlets blocked off and only one breather hose. The '78 had two hoses, one on each outlet. It also had rubber reducer plugs in each outlet, reducing the I.D. to about 1/8".
PCV valves don't work on the breather hoses. What we use are power brake check valves, but you won't need them if you're hooking the hoses to the airbox.