If you get the O ring and receiver groove depth and width proper it, the O ring, shouldn't hold the head away from the block enough to worry about sealing the oil and water passages, unless your going to use solid copper head gaskets
If you choose copper head gaskets then use a thin layer of silicone as you like
BTW SCE gasket makes several different types of copper head gaskets, one has a built in O ring in them so you only need to worry about machining the receiver groove in either the heads or block