>| Where do the thin >| green O-rings go - around the lip at the top of the cylinder?

Yes. In that little groove near the top.

>| The thicker black O-rings go at the base of the cylinder - can you install them >| with out pulling the cylinder out past the piston rings?

Yes. First, with the piston you are working on at TDC, pull the cylinder out like you are going to remove the wrist pin. With a little dental pick/scribe/real oring remover, remove the old oring from its groove - one of those dental mirrors will help with this. Once the oring is out, snap it in two. Then roll the new one down the cylinder and spend some time getting it seated. The mirror is helpful here too as you can see if there is any lip which you would need to get the oring over in order to get it properly seated...

>| Should I replace it anyway?

Some say of course you need to, others say you don't... If the oring is compacted flush with the base of the cylinder, you will definitely need to....

>| There was 1 extra O-ring in each one of my my kits - same diameter as the black rings >| but about 2x the thickness - I have no idea where it goes.

Most likely for the water pump to block mating surface.

>| What do you think about Permatex gasket sealing compound?

It's great for some other uses than the heads on a waterboxer...

dave