FWIW I’ve installed my 4l60 3 times with the o-ring at the front of the tail shaft adapter and the paper gasket at the rear where it mates to the transfer case with no sealant and it’s worked fine and very little trans fluid has ever been found inside the adapter. The design works.
Okay so I've discovered the terrible design of the 4L60E tailshaft when mating to a Transfer Case Adapter. There is no external seal on the transmission so the adapter "tunnel" fills with ATF. I've been scouring the internet and found others with the same problem. There is some discussion of a "grey silicone". I don't believe it's RTV. Can anyone tell me what it is? Mine actually had some on it when a remanufactured transmission was installed! I have some Permatex Transmission Sealer that's supposed to be impervious to ATF. Should I use that? I am actually considering tapping a small hole in the bottom of the adapter so I can remove the plug and drain it once in a while! Need some advice please.