When cleaning up the front cover on my engine, I noted an L-shaped half-round groove near the water pump inlet/outlet. It gets covered by the gasket so it's just an opening to atmosphere.

Anyone know why it's there and what it might be doing?

It's probably to prevent cooling weeping into the oil. Vented to daylight instead..

Seconded. That groove is an attempted insurance policy in the event of a gasket failure and coolant leak. It's supposed to route leaking coolant out the side and onto the ground instead of routing it inside the block where it would mix with the oil.