It looks like he's using plumbers putty there, I use the "clay"/ putty found in the electrical section of any hardware store.
It's just to make a dam to hold water for cooling and to keep the cut flushed out.
yup I used plumbers putty to form the damm. It held the water very well and was cheap......when you do it just go slow this is one project that is not a rush....
I just put 7 holes in my tank... I was also paranoid about breaking so I didn't put any pressure at all on the drill... I averaged 18 minutes per hole!!! I wish I had known it could be done faster safely because my back was killing me by the time i was done.