Sorry for late reply; been real busy.
Yes, apply the sealer all around the areas of the "collar" that contact the engine; basically the front and bottom of the collar. Use special care to clean in the corners along the bottom where the oil pan joins the block and the pan gasket may be frayed. Use iso alcohol to clean, or any good gasket cleaner. I used Permatex blue gasket sealer - MB may make a special mega$ sealer that is better than Permatex, but I highly doubt it.
It's all very straightforward and obvious when you get in there. The only touchy thing is slipping the seal lip over the crank. Be sure the crank edge is very smooth so the seal does not get cut; lightly sand the corner of the crank flange if it's not really smooth. (then clean it of course).

DG