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Yes, definitely use some of the light OMC/Merc/Yamaha liquid gasket sealer on that water cover gasket. Do not use silicone or any goop like that. During factory assembly, oftentimes no sealer is used because the surfaces are flat with no imperfections, so the plain gasket seals up just fine dry like that. Be sure to apply gasket sealer to the bolt threads as well, so they don’t rust in place.
Be sure to clean out that thermostat cavity completely. The inner bore needs to be cleaned out so the thermostat slides up and down without binding when the pressure relief activates. The area underneath where the thermstat/rubber gasket sits must be cleaned up carefully also to be sure it seals well when the thermostat is sitting flat on the head (pressure relief not activated). If this is overlooked, water will sneak around the base flange of the thermostat/gasket and the engine will not heat up sufficiently at idle. These engines are very cold blooded, and need to develop some heat to run OK at lower RPMs.