Great picture.
The problem is that you assume that any lubricant would have prevented damage to an an o-ring on an improperly prepared case.
The damage to the o-ring was caused (IMHO) by the fact that the through bolt washer mounting surface was apparently ignored by the "mechanic" that assembled the engine.
The mag case moves during excessive heat cycles and the movement can create an uneven sealing surface.
A proper overhaul includes the surfacing of these bosses.
