The same colleague just also suggested what sounds like a workable idea - cast a gasket or cup-type seal out of silicon or similar liquid sealant (possibly with some finely shredded teflon mixed in). I guess just lightly oiling the cylinder and piston face would allow you to cast several so you...
I am currently in the early stages of building a single cylinder stirling engine to run from my domestic wood stove. I have the same desisions to make regarding the seal on my cylinder, which will need to be both low-friction and as airtight as practically possible. I have experimented a little...