The residue is called 'frass' and is produced by most wood boring creatures. Looks like you have a borer in there somewhere.
You can get rid of them by skewering it by poking a piece of wire up the hole.
If the hole turns too much to get a wire right in to the grub you can squirt a little bit of metho or petrol into the hole then plug the entrance. The fumes will kill it almost immediately.
There are also borer sprays and paste from the nursery.
The bad news is you have a wood borer and if you follow the advice already given you will kill the borer. The good news is when you get around to carving that trunk you will have some beautiful lines to follow (that the borer has left you) and that will take you on a natural looking path.
Its good stock so we are looking forward to its progression.