Well I had a leak in one of the freeze plugs on the back of the engine so I dropped the transmission and pulled out the freeze plug. I found a good size notch in the block where the plug seals (picture below). I got a new freeze plug and put some Permatex RTV but I'm not sure if this will work. Are there any other options to fixing this? Also would I need to put the transmission back in to start the engine to see if it leaks, or will the engine run fine without the transmission in?

 

There is a rubber freeze plug replacement that might work here. You would push it in the hole and then when you tighten a nut in the center it pulls a metal plate that expands the rubber. You should be able to find them at your local parts store.

 

Don't need to start the engine to pressure test it.