no water should not be comming out from that pinch area......it may have a crack, and have to be replaced......this unit is only there to shut off the filter flo for when the spotscrubber option is selected.....if it is leaking, for now, you can remove it, and either replace the whole hose, or insert a piece of plastic pipe with clamps......
it won't affect normal performance if this unit is not there......all functions, including the mini basket option will work.......spotscrubber is based on the filter flo pouring water into the minibasket for a set amount of time, and then shut off the flo, allowing the concentration of water and detergent to scrub out stains.....during rinse, the flo resumes its normal operation