'74 2.0 flywheel questions

[zymurgist]

I have a few questions about re-mounting a flywheel. I have the engine and tranny out to fix some oil leaks and replace the clutch. I have the new main seal and flywheel O-ring... the O-ring was pretty damaged when I pulled it out; groove was covered in gunk, yadda yadda.

I have a couple of questions for the 2.0 gurus:

1. What exactly does the O-ring on the inside of the flywheel do? I know about the main seal (hey, Chevys have those), but the seal between the flywheel and the crankshaft... what's it for?

2. What about the surface inside the flywheel, that is, the area under the O-ring groove? Does that area have to be flat and smoot, or can it have some pits and valleys? I'm wondering if this surface has anything to do with oil control.