Had an old home down in Florida with no insulation and only wood siding. Had blown insulation put in by drilling holes at the top as you described. They put the circles back into the holes when done, caulked around it to seal them up. Had no problems the whole time I had the house. I now live in cold, cold Iowa with another old house with no insulation but I'm looking into having foam insulation put in about the same way. This house at least has vinyl siding on top of the old wood siding so if I've been told correctly, they just remove the vinyl piece, drill thru the wood siding and then replace it, seal it and then put the vinyl siding back on. More expensive though.