The purpose of the Bypass Valve ("BYP") in the filter adapter, is :
1) ensure an adequate supply of oil reaches the engine should the the filter clog ,
2) act as a safety valve to prevent excess differential pressure from rupturing the filter (eg, high oil pressure with heavy weight oil and/or cold starts. The BYP opens with only 8 or 9 psi.
The idea being, that Any oil (even unfiltered) is better than no oil.
The BYP has nothing to do with oil draining out of the filter. That's the job of the Anti Drainback Valve ("ADV") in the filter itself.
Plugging the BYP is controversial, there have been many threads on it, do a search. I decided to plug the BYP so that if anything ever broke in my engine, the shrapnel would not get past the filter via the BYP. In return, it requires more caution driving the car, until the oil pressure has dropped to its normal hot idle pressure.
Here's some pics of how I did it :
http://community.webshots.com/album/63093078uJqZEQ
Since plugging the BYP, I learned there are specially tapered pipe plugs that sit flush with the surface, and I wouldn't have had to modify the aluminum pipe plug shown in my photos.
At
http://www.mcmaster.com/ , do a search for # 4534K44 , "Steel Flush-Mount Hex Socket Plugs ".
If you plug the BYP, I'd suggest :
1) Use a Biggie filter adapter and a large filter with more surface area.
2) Use only heavy duty filters , eg Baldwin or Wix racing, to avoid rupturing the filter under cold start conditions. Retail store filters are positively flimsy by comparison.