Best Method of Sealing Timing Cover/Oil Pan

I'm planning on degreeing my cam and assembling the timing cover this weekend. Good tip on centering the cover first!
But I do have a question. I cleaned my timing cover yesterday and installed the seal. My question is this. Does the seal go flush to the outside? If so it will be sticking out inside the cover. Right now I have it flush on the inside and it's sticking up about 3/16" on the outside.

Thanks...............Ted