On this particular one, I think it just terminates at the end of the hose provided. Looks like that second blue adapter is probably/hopefully a small spark arrestor of some kind. Yes, it does sound like a good idea. I've seen a similar idea on Dragon Custom's site. Theirs has a sort of bottle on the end of the tube to collect the oil vapors.
Only thing I'd be cautious of is to locate the end of the tube where any oil drops will fall away from the path of the rear tire.
I'm considering a mod to my breather hose which comes out of the valve cover on my X 500. I don't like it pumping oil vapor into my paper air filter so I'm gonna disconnect it there and put a small spark arrestor on it and just let it breathe in the air.
