The moly lube lowers friction so you do not need as much torque. Any holes penetrating the water gallery will need to be sealed, usually with teflon pipe sealant. If you want the most accurate results on bolt seating at a given torque then break in the (new) bolts first. If the block is new use the block threads, otherwise make a threaded block and torque the bolts into that (with lube, making sure the bolt heads seat) a couple times to precondition the threads.

On GM crate engines the directions say to use oil for lube.

Kitz