I think it's preferable to run the rods externally (like Sheerline), if you have enough enough clearance, removes many potential sources of leaks, and frees up space for equipment. If there is no alternative but to run the rods inside the cylinder,flat rubber washers are a lot more robust. You can cut some out of an old car or bicycle inner tube, other alternatives include tap washers etc.
Looks like you're using normal nuts with free washers. the nuts should be capped type with washers soldered on- the underside of the nuts is not flat enough and cuts the seal resulting in leaks. Brass dome nuts are readily available and cheap, and are easy to solder washers onto- soft soldering is quite adequate strength wise. With ordinary nuts, water tends to work it's way along the thread, and past the seal, via capilliary reaction (water pressure also helps).
To test the cylinder, consider installing a schraeder valve (tyre valve) in one endcap. Give it a few shots of air with a bicycle pump, and leave it for a few hours. If the pressure remains after that time, you can be fairly confident that you have a watertight cylinder. Some leaks can occur under vacuum conditions, and will fail to reveal themselves under a pressure test. However, as you're using a ballast system which pressurizes the cylinder by a few PSI, and is also vented when on the shore, it's highly unlikely you'll ever see this situation arise.
