The bottom of the housing should be plain metal. No paint, no "O" ring. Yes the vacuum advance needs to move the whole distributor. So it must be a "free running" fit in the block. A bit of work with some emery cloth will make the paint go away. No need to remove any metal just take the paint and any "bumps" off and clean it well. Don't want any abrasive in the motor. Should slip in and turn easy when you are done. Make sure that the oil pump is engaged then set the timing and you are good to go. No gasket here either. Expect it to weep a bit. Then you know it has oil and all is good.

Steve H