R&D used PTFE tape and advised me to do the same when I replaced NB Earnest's stern tube*. I was give a load of rubbish by a certain well known boat yard close to us, that you would never be able to fit a replacement stern tube so that it "lined up" and mated against the stuffing box X-Members. They envisaged having to cut out and weld in a new outer tube! Total rubbish, I had no trouble at all. Big stillsons with scaffold pole extension just fitted in, to initially crack the joint. In the case of NB Earnest it was an easy job.
There is, of course the essential tip of getting an exact size replacement tube. It probably won't help you, but the R&D standard 7" x 11/2"size was supplied by Watson Engineering*, on the same trading estate as R&D / XR&D in New Ollerton Tel 01623 860780...A quick Google confirms they are still there.
Watson Engineering*
AFAIK, they supply stern tubes / stuffing boxes to a lot of narrowboat fabricators and are considerably cheaper than dealing with outlets, like Midland Chandlers, etc.
stern tube*
Knackered by cracked engine mount bolts, due to engine mounts being set too low. Replacement ones set up on 1/2" steel spacers. New one been going strong for 9 years.