If you look at TM 5 2420-224-34 on Page 617 / (15/65), you will notice that it lists the spacers as packing. I don't remember the details when I assembled mine, but it appears that the spacers go under the cover without any other packing or gasket. I would surmise that the sealing occurs between the innermost spacer and the main assembly. If you use sealing compound, I recommend placing it around the edges of the innermost spacer only since this is obviously the only area that could leak air. I would try Permatex #3 AKA Aviation-Form-A-Gasket. Make sure only a thin film of sealant is used because you obviously don't want any of the sealant to enter the area where the piston slides. It is interesting that the assembly directions for this small cover doesn't mention the metal spacers or sealant. As mentioned, I don't remember the details when assembling mine, but I don't remember using any sealant. However, I didn't pre-test mine with compressed air prior to final assembly like you did, so mine might be leaking air as well, but it works fine anyway.
