I am thinking that if it
IS a constant flow regulator, that the exhaust is controlled by the now "chewing gum" valve that used to be in the reg.

It would have adjusted the "leakage" of air from the two middle(?) return ports and acted as a relief valve to slow down the "Delta V" or density/velocity of air as it escaped the reg. The control valve definitely looks like a set screw arrangement that could be adjusted for various flow. It would have been adjusted for DV on the surface for a specific interval of time and a specified depth. This was first accomplished through trial and error for the first few dives or so and at shallower depths of so and then the diver would get a "feel" for what setting was good for what time and depth. After all, it is basically a controlled free flow regulator. To answer your question, the out-flow would have come out around the adjustment lever end of the reg. most likely. That being said, the diver would have taken a breath and either breathed out back into the circuit of flow through the use of a one way valve in the mouth piece(very possible due to low pressures of such rigs),exhaled through his nose using an adjustable nose clip, thus turning his nose into a kind of a "Duckbill" if he was wearing goggles, or he had a venting mask of some type and exhaled through his nose normally. This is a mystery.
Then again, I could be wrong on all counts.