The O-ring suggestion was for a smalll gap, foam for larger. Get a single piece of foam pipe insulation at a hardware store and cut the length you need for each side. put a thin layer of grease on the axle (not on the flats), the face of the BB and the crank arm. Or you can put grease on the BB and crank arm and just run a bead of silicone seal in the gap - easily removable. I agree that a drain hole in the bottom may be a good idea, especially if you ever leave your seat post off in the rain.
Also don't neglect the headset if you don't have fenders. First overhaul the headset. Before you reassemble find a discarded inner tube (bike shop will have) large enough to easily stretch over your head tube. Cut about a 2" section, grease the inside and fit it over the head tube. Reassemble the headset/fork and pull the inner tube down over the lowest part of the headset that is on the fork.
Last edited by cny-bikeman; 10-02-14 at 11:40 AM.