Chris,greetings.
The Line in/out connector is a dummy plug incorporating two links.Removing it breaks the connection between the preamp and power amp of the BC7700.As you say,it was intended originally to loop the signal via an external "graphic sympathiser",until these became frowned upon!
You can connect signal sources here,but it will cut out the internal ones.
You could of course,connect a mixing desk here,that would allow to extract the internal signals,but also add those from external devices.Ferrr.y interestink!
Regards,
Nick