You can use RTV but you need to check piston to dome clearance at the edge of the cylinder, a piece of solder through the spark plug hole will get you a good measurement. You want at least .025 and preferably .030-.035 between the squish band in the head and the top of the piston. Before going through all that I'd take a very close look at the fuel lines and muffler gasket. If it looks like a puddle of oil it's likely exhaust slobber, that gasket doesn't hold back any fuel or oil it keeps the crankcase/cylinder sealed and any leaks usually show up as a lean condition similar to a vacuum leak on a car.