In a situation such as this, it is best to go to someone who has all of the correct current tech answers -
http://forums.y-blocksforever.com/Topic162183-1.aspx
I would also ask his (TED EATON) advice on any sealer used on a composite gasket.
As for the leak, it may appear as only exterior but it may also may be being ingested into the coolant (exhaust gases) and/or engine oil. The Y-BLOCK is tough but it ain't that tough.
Used head bolts need to have the threads completely cleaned and the threaded holes chased with a thread chaser/tap so as to able to arrive at correct torque values. As for a lubricant, see what ARP and TED EATON recommend.
Remember also that there are short/long head bolts and they have to be installed in correct sequence.
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"Last Sunday, I caught him makin' eyes at Idell Bushey durin' preachin'. And I know what they do up there in the hills when they say they're possum huntin'. They're just sittin' around the campfire, drinkin' hard cider, hittin' each other on the shoulder and hollerin' 'flinch!'."
― Charlene Darling (Daughter of Briscoe Darling)