The aux air regulator should work just dandy that way, no issues I can see as long as you have an external voltage regulator. Note to others, though -- with a Delco or other alternator that has an internal regulator, the alternator output is electrically the same point as the battery, so the air regulator would be hot all the time (and your battery would eventually go flat). You'd need to hook it to the switched 12V ignition circuit.

On a B20, the breather on the block connects to the air cleaner (box if ya got one, or either filter if you don't). There should be a mesh flame trap in the breather fitting that the hose attaches to. The oil filler cap connects to a restrictive orifice on the intake manifold.

No idea where that gem of a wire goes, sorry.