I think I'm going to use silicone sealant. Since the element is under water it shouldn't ever get much above 212* Also this is the base of the element, not the actual element itself.
McMaster-Carr
7327A21 Underwater Silicone Sealant 2.8 oz Tube, Clear $5.72 Each
... Sealant is FDA CFR21 177.2600 compliant when it reaches full strength and is washed. Meets ASTM C920, Class 25. This product is VOC compliant in all 50 states as of October 1, 2008.
From FDA
FDA CFR21 177.2600
Rubber articles intended for repeated use may be safely used in producing, manufacturing, packing, processing, preparing, treating, packaging, transporting, or holding food, subject to the provisions of this section.
So it is food-grade underwater sealent (used for aquariaums) and good up to 400*F
Guess I'll take my element off the keg and sand off the rust, re-install and then silicone over the exposed part.