Replacing shower valves/faucets - have questions.

I have a three knob shower faucet setup (hot, cold, water direction) with completely worn out seals. So, I did the easy/cheap thing and bought one of those crappy DIY new faucet kits at Lowes and am trying to install it. The pieces aren't exactly the same size, but it's close enough for the most part. I did the cold water valve last night and it was a a PITA to get the new valve assembly to seal into the old socket.

I am having trouble with the "Washer" in this diagram that sits between the Bonnet and the unlabeled socket in the wall.

I'm going to go to Ace and see if I can find a better fitting washer/gasket, but should I be putting some teflon tape (or other product) on the brass thread on the bonnet? The crappy directions that came with the new valve did not indicate so, but I don't know.

Also, how important is replacing the seat? It doesn't seem like a part that would ear out, and if the old one works... Any other tips before I make more of a mess? P.S. The cold water valve is operational but I do not trust the crap washer that is in there over the long term.

Take your old valve cartridges and go to a real old fashioned plumbing supply house. They'll have either correct new cartridges or correct packings and seals to rebuild the old ones.

Lowe's and HD carries generic junk mostly.

Who made the old faucet? Some of the bigger names will send you a replacement cartridge for free, if you can wait.

I didn't see a brand name on the old stuff anywhere. It's obviously not a high quality item, no better than the cheap replacement I bought and rather similar honestly. The previous home owners appeared to be at least as cheap as I am and even less inclined to do quality work. Seriously, everything I've taken a close look at in my house as I change things is "holy crap they did a bad job". Not that I'm a great craftsman... so, that might actually indicate how bad things are if I think they are bad.

For example, the old flanges are completely filled with a pile of caulk... I'm not sure what they were thinking (if at all) since it served no purpose.