I have had my motor back out several times based on through bolt leaks. The key to getting a good seal on a 2.7 mag case is to bevel the cases. The holes in the case go out of round as the case halves shuffle, and often little edges build up--at least they did on mine. Ollies recommended that I use a countersinker tool in a tap holder and clean up the bevels. Wayne's book only mentioned beveling the holes in passing. Before I did this the o-ring squeezed out of the washer as in your photo. After it seated nicely and I have no leaking from the through bolts now. A pain in the ass requiring substantial disassembly but that is what cured my problem. Good luck !
