Probably similar to what was used OE, though whatever remnants of that remain today have become too friable to tell. I recall using several sealants - pipe dope w/ teflon, Permatex gasket sealant (gooey ethanol based purple gunk), and teflon tape (usually thicker yellow for-gas type). All have shown no leaks and get a good ground connection so the dash temperature gage reads correctly. Hard to find exact info, but I think those temperature sensors are an RTD type, where the resistance increases with coolant temperature, perhaps using a platinum wire (or perhaps less-pricey metal). I vaguely recall the resistance values being similar to a fuel-level gage (<100 ohm), whereas modern versions are higher (~2000 ohm).
