I've done it both ways. The first time after installing a rebuilt head after a timing chain failure. The seal leaked, but since the cover was not leaking, I didn't want to redo the cover.
I dug out the seal, cleaned the surface of the cover and inserted another seal. (oiled on the inside) I tapped it into place using a tack hammer until the seal was evan with the surface of the cover. No leak now.
'05 E320 CDI - 86,000 miles
'86 300SDL - 360,000 miles
'85 300SD - 150,000 miles (sold)
'89 190D - 120,000 miles (sold)
'85 300SD - 317,000 miles (sold)
'98 ML320 - 270,000 miles (sold)
'75 300D - 170,000 miles (sold)
'83 Harley Davidson FLTC (Broken again) :-(
'61 Plymouth Valiant - 60k mikes
2004 Papillon (Oliver)
2005 Tzitzu (Griffon)
2009 Welsh Corgi (Buba)