I have done some more research with more to follow. I got some great advice from a good friend. He said do not drill any holes in the distributor cap, as a spark could come through the hole and ignite vapors under the hood, which would not be good.
Evidently, in a lot of cases vented caps from a manufacturer come with screens or other devices to keep the electricity confined to under the distributor cap.
There is also the possibility of vapor (blow by) from the motor coming up into the distributor, but I am running a fully functional PCV valve setup and there was no oily reside under the cap, so in this case I do not think that is the issue.
Could be a manufacturing tolerance stack up, that resulted in a wider gap than usual, between the rotor tip and the contact points inside the distributor cap. This could explain the amount of arcing that seems to have occurred.