CJ,
What you have been told so far is correct, no iolite or other bush will retain oil. The whole Myford lubrication philosophy is one of "total loss".
Oil should be added up to the level screw and not above. after refilling leave the level screw out for a while as it is of small diameter and it will take some time for the actual level to establish its self.
You do not say what grade of oil you use. Never use Esso Nuto or any other H32 grade oil in the gear box. The instructions that came with my gearbox (one of the last made at Beeston) states on page 2 that K68 oil should be used however later instruction in the book (page 15) specifies SAE 30. Both of these oils have a higher viscosity that H32 and K68 is clingy and less likely to leak through a small gap.
Are you sure about the OD of the bush as Myford would surely have used a standard 3/4" OD bush rather than go to the trouble of machining a standard it down for no good purpose?
I have a 5/8” bore x ¾ x ¾ Oilite bush that you can have or a 5/8” x 7/8 x 7/8 if you have to machine one down to an odd size. Send me a PM if you want one.
If the leadscrew is badly worn or has a rough surface it could be reclaimed by having metal sprayed onto the worn area which is then reground to your required size. When I was running an engineering department I had two very good suppliers that offered this serves with very fast return times. One was in Luton and one in Northampton. This is Avery good and accurate way to reclaim worn shafts.
Eric.