You are correct, it's just a reverse screw thread that is supposed to fling the oil back and keep it from coming out of the hole.
Because the original crank pulley has this screw thread, you cannot put a seal on it unmodified.
However, for every problem there is a solution that enough money can solve.
There is a company that makes replacement timing covers with "modern" type of oil seal as well as a modified crank pulley.
It is not cheap, but it does not leak either.
http://www.joesrestorationrescue.com/pr ... -cover.php
http://www.joesrestorationrescue.com/pr ... pulley.php
http://www.joesrestorationrescue.com/pr ... shment.php
Or, if you are "do-it-yourself" person with a machine shop, here is how to do it.
http://teae.org/adapting-an-oil-seal-to ... ne-engine/
And last, but not least, if your engine is old, the grooves of the oil slinger on the crank pully can get full of gunk and then it does not "sling oil very well.
If you have the tools to remove the crank pulley without damage, you can take off the pulley and clean out the screw "thread" and that may be enough to get the leak down to a manageable level.
Also, I seem to recall that some engines had an oil flow restricter that reduces the amount of oil to the timing chain to help with this issue, but it can cause your timing chain to wear out more quickly so people remove them to improve flow. Someone else may have better, more accurate info on this.
Good luck!