So I would like to update this for anyone that finds themselves in a similar situation, 66 model Mooneys had a separate "remote" gyro installed on the pilots side underneath the panel which can also be accessed through the outside of the plane from a panel located between the main top engine cover and the windscreen. In 1967 Mooney installed the gyro into the turn coordinator. If you have the trim knob on the yolk, you have a remote gyro. Porter Strait Instrument has a past employee of Britain that built these levelers working there with great knowledge and will still rebuild some of these units. The simple way of testing the system is to apply suction via mouth to each of the red and green lines, you will see the yolk move to one side with red and back the other way with green. I found that red was just fine, green couldn't hold vacuum. Both red and green have a T in the line and that is located in the baggage area behind the interior paneling. (the panel farthest from you looking into the baggage area). This T has line going into the tail servos (which can be access through the tail inspection panel on the pilots side) and the other is routed directly to the ailerons. After disconnecting the T you can vacuum check both the tail and ailerons vacuum for leaks. I very quickly found a leak on the green side of the line in the tail servos rubber boot hidden on the back side. I've been told people have had success using bike tube repairs. I'm going to have the boot replaced (hopefully). Hope this helps anyone out there with similar issues. After many many hours of research, calling around and talking with some guys I feel like I know this system almost like the back of my hand now. To anyone searching around and looking at the maintenance manual(highly recommend on in the download section), be very specific with what year of the diagram you are looking at because they are all lumped together.
Also replacing the o-rings inside the push button cutoff valve in the yoke will make a great difference and that simply just pops right out by hand.
For my original post the black cracked line goes into a vacuum filter located behind the pilot side paneling.