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I believe that hose is the overflow from the carburettors. It leads out and drips excess fuel onto the chain to act as lubrication. Quite a lot of motorcycles use this system.
So when you squeeze it shut, the revs increase? That is weird, maybe it creates more pressure within the carbs, allowing for more fuel to pass through, as it only has one option and cannot use the overflow to escape if it builds up too much.
I am no mechanic, so it is just best to look after the engine, and keep it running/in use. Your best bet is to try and remove the carburettors completely, but you risk damaging the intake manifolds. It would be too expensive to take it to a garage, as they would drop the engine using a jack, charge you for labour, parts and it would cost far too much for what is it worth.