Threads do not have 100% engagement between the male and female parts of them. there's always a few thousandths of clearance to keep them from galling as the bolt is tightened. The sealer fills that void, and the small amount of sealer at the bolt head is just insurance in case any coolant makes it past the thread. The sealer is also a very effective lubricant, allowing all the torque to apply itself to bolt stretch rather than be used up overcoming thread and bolt to cylinder head friction.
Jerry

"It is better to be silent and be thought a fool than to speak and eliminate all doubt!" - Abraham Lincoln
Cringe and wail in fear, Eloi- - - - -we Morlocks are on the hunt!
There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self. - Ernest Hemingway
Love your enemies and drive 'em nuts!