Glad you got it worked out! The hole was drilled with a step bit to 7/8" per the spec on the Weld-B-Gone spigot you were buying.
I do find that everything seals much better if you do a few things.
#1 put the silicone o-ring on the outside (you don't need the one on the inside)
#2 screw the locknut onto the nipple fairly tight, put on the silicone O-ring and put it through the hole in the keggle, then add your washer and SS coupler on the inside.
#3 Tighten down the whole thing turning the coupling (so as not to hurt the O-ring)
#4 Put lots of pipe tape on the threads (as you've discovered) and screw on your ball-valve, after it's bottomed out, adjust the whole thing to have your handle vertical.
I like the weldless fittings but when I get my single tier all keg setup I may try to find a local welder, I've just balked at the cost.