Oring is better. Better heat transfer and holds up to pressure a bit better. A little back ground, most builders buy a 300 sleeve and slap it in a stock cylinder. Most aftermarket sleeves run such a large outside diameter that it cuts into the water jacket. Different metals, when heated, expand at different rates, causing small separations between the aluminum and iron. This allows coolant to run down the outside of the sleeve and into the bottom end. Also they run stock head studs, which have big flanges on them. This does not allow enough mating surface for a tin head gasket to work. And not enough material to cut an oring groove into.
Its been years since I've talked to Arlan about his 300 kit for oem cylinders, but he was having a sleeve made that didn't cut into the water jackets, and he used a non flanged stud. He could run the cast iron a bit further out at the top of the sleeve, this gave enough room to cut an oring groove.
That was a rock solid kit. Barry Hawk and Bill Balance won many gncc races and championships with that motor
Best regards
-Jason