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Must be a coolant/block heater...probably installed in certain regions of Canada due to the cold temperatures. I certainly wouldn't remove it; it's not hurting anything and may come in handy someday to you or a future owner.
Welcome to the world of crossthreaded bolts. Seems to be a common thing with the Xterra...I've had at least 5 of them so far and I know Schludwiller has had some too.
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ChuckH
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