Oil helps it compress evenly, it will get somewhat wet during use and I think the basic idea is you soak it first so it's all soaked instead of unevenly wetting during use and potentially compressing more in those spots and enabling a leak.
People also use sealers, for some applications it's worth it, but honestly I mostly use sealers 1) where no paper gasket can go due to clearance, like many engine cases and 2) just to hold paper gaskets in place. it's a pain when the gasket falls and you punch a hole in it when putting in a bolt cuz it slid down and wasn't lined up right. If you glob it all up with silicone though the little bits can make unnecessary mess. I don't think silicone is "breaking down" paper gaskets as I've seen some places suggest, theres some mild acetic acid (vinegar) part of the curing usually (however those types of RTV are usually not good vs gas/oil) but that's not gonna hurt anyone. I think it's more that you just don't get any synergy - if it's a high pressure seal it's gonna leak out whichever is weaker, the paper or the silicone around it. so you don't benefit from both. (except holding it in place)
As for which RTV? doesn't seem to really matter. people have used everything and everyone' got their favorites and there are small differences and none significant. it's like asking what oil to use. some people say use the fanciest nicest most expensive, and someone else has probably run for 15 years with superglue and playdough
Anyway in your case, you can smear some JB or epoxy on the outer edge it'll give the gasket more space to seal and no chance of it hurting anyone. An easy way is clean it up, put your gasket down and put some wet JB there, compress it with the cylinder as you put it on and then you don't need to worry about poishing it flat. it's just there to back-up the seal. I'd also cut that case match a little away off the edges, though any lip in the match creates unwanted turbulence...