1) Sealing up potentially wet sheathing in what will be a heated space
is just asking for trouble. To avoid future problems, remove the
plywood to make sure the framing is sound. Replace ALL soft or rotted
wood. Make sure everything gets to dry out and treat with some sort of
pesticide that contains borax or boric acid. This will not only kill
any existing pests, but also ward off fututre infestations of anything
from fungus to termites. There are many different brands, see what
your local landscaping supplier has. Also check out this info:
http://alsnetbiz.com/homeimprovement...ot_repair.html

2) Sounds iffy. Keep an eye on it and re-caulk when needed, I guess.
It's not the right way, but if you're looking for a short term
solution...