"Did the woodpecker peck the ground all the way to China?" Nope... only to "Burrowsville."
"How big was the hole?" Big enough that it made my granddaughters' dune buggy bounce several times when they ran over that area.
"... did he throw up big chunks of ground as he did it?" No, I think he ate it all as he started getting bigger and bigger! I'd hate to see his "bird droppings!"
"isn't it true that biologists think birds can hear ants/bugs?" Well, we can heard crickets, bark beetles, chidadas, and such, so I imagine it is possible. Or, maybe they're just listening in on the ants' radio communication systems. Can you imagine if these little guys had computers and the woodpeckers hacked into their "tree-wide web"?
But seriously, ants do have an acidic odor to them. Haven't you ever smelled them when the flying ants start coming out of the ground? If the birds are able to smell that, then yes. Birds aren't completely unable to smell. They do have some olfactory nerves, just not as many as you cats.