yes mate, that is where the condensation from the evaporator comes out

not sure that it should have a plug in the bottom though if you block it, and run the air con, the water will have to come out somewhere, and if it can't come out of there it will just get fuller and fuller and come out somewhere else (probably in the cabin on your carpet). that will also mean that you'll probably get a bigger build up of bacteria in the system, that makes it stink when you run the blower.