I think they meant for you to put a drop of oil on the pad to keep the rubbing block on the points lubricated. I usually slip just a bit of grease on the side of the rubbing block though. The felt pad rubs against the cam for the points and keeps the block lubricated. I think the next thing I'd suspect would be the coil. The way you described it is the way some coils go out..when they get warmed up they open up, when they cool back off they go back together.
He's talking about the round felt that surrounds the crank seal, not the little felt that rubs the crank that your thinking of.