I'm installing a new crate engine in my 67. There are 2 metal lines from the fuel tank. The larger is the fuel line and the smaller may be vacuum. Is this line necessary and what is the function of it? My car is factory air with the vacuum canister and does the fuel pump create the vacuum for this? Thanks.

 

That smaller (1/4") line is a return line, not a vent or vacuum. The return style sending unit was used on the 350 & 396 models. If your present setup doesn't support a return, either at the pump or carb, then you'll want to close off that small line.
As far as tank venting, the vented style gas cap took care of that, and no other external type of venting was used.