Sealing with monocote is a good way to go. I seal the hinges on all my planes using Ultracote. Use an iron to secure in the grooves and then shave off the excess with a razor.

Regarding the hinge cutter, I have the Great Planes slot cutter and I cut the slot using a guide and then remove the guide and insert the cutter again which cuts the slot about 1/8" deeper without the guide in the way. CA hinges seat fully.

somegeek