I'll take a shot at this one. The deformed O-ring has been over-heated. I'm guessing you are direct firing the HLT and the heat from the burner is lapping up the side of the kettle. This is causing the fitting on the outside to be subjected to very high heat and the heat is being conducted through the fitting to the O-ring inside. A heat shield might prevent this from happening. I'm gonna guess again that you are probably using either a big multi-jet wok burner or one of the large banjo burners. These put out a tremendous amount of heat and a lot of it escapes up the sides of the kettles. I would replace the O-ring and fabricate a sheet metal heat shield to protect the fitting on the outside. Might help not to run the burner wide open too. Post back and let us know how you make out with the fix. Might help some others in the same boat.
I can't see all the component parts of the lower outlet connection, but if it was leaking even with a good, non-deformed O-Ring, I suspect that it may be leaking along the threads of the nipple if that is what you are using. Sometimes you can fix that problem by wrapping the nipple threads with lots of Teflon plumbers tape. The problem is that the O-Ring will seal against the inside of the kettle, but it can't seal the irregular surface of the threads very well. Alternatively, you can use something other than a close nipple. A close nipple is threaded along it's entire length, so there is no place for the O-Ring to seat that does not have threads. A slightly longer nipple will have a smooth section with threads on either side. Position the O-Ring so that it rests on the smooth section. This will often require a number of extra SS washers (on the inside and/or outside) in order to get it the nipple positioned properly. IOW, use the extra SS washers to take up the slack introduced by the extra length of the new nipple; spacers if you will. I'm pretty sure this will solve the problem.
