It sounds like the timing chain may have worn a groove in the timing cover. The chain can stretch with use and age where the oil pressure operated tensioner can't take up enough slack which will break the drivers side plastic chain guide. All this ends up letting the timing chain rub on the timing cover until it cuts a groove around 3/16"-1/4" deep hitting a coolant passage. It makes a big mess, pull the head, timing cover and have a look. clean the resulting sludge from everything possible (radiator, engine block, head, oil pan, etc). Hopefully it wasn't driven too many miles with the compromised oil wearing on the motor. This does happen as I am currently repairing a 1990 toyota pickup,
22re with the above problem (clean spark plugs, good compression, mixed coolant and oil). There is a fix (which I am doing) for the problem, a few companies offer metal timing chain guide(s) with hard rubber bonded for a whole lot more durability. (check: engnbldr.com) As far as the silicone question, never heard of it nor used anything on head bolts or head gasket.