Leak from Hole right behind Handle of Frost Free Hose Bib

Ok, hopefully the title says it all. This leak has me puzzeled. I had assumed that it was from the nut facing the faucet right behind the handle. I removed it, and replaced the material in it with some teflon type tubing. Well, long story short it appears that it was fine but the water appears to be coming out of the small hole right behind the handle, but after the first "packing nut". Has anyone seen this one before? All nuts are right that I can at least reach so I am very dumbfounded on this one.

Any help would be greatly appreciated.

Is it gushing? I have taken several apart with great success so as to make repairs. I find most frost free will leak from the vacuum breakers. I would check that to make sure it is not rolling down making it look like something else.
I think taking a pic would help.

There is a spring loaded plunger on the end of the stem that is failing to close.
The water is coming up through the hollow stem.
Depending on the brand and model's parts availability replacement may be your best choice.

If you decide to replace, Legend makes a nice 1/4 with rubberized handle.