My only concern is that when i tried to tighten the sender, it kept rotating... Hopfully the threads on the block aren't stripped!
I'm afraid it sounds like they are, and that was probably the leak in the first place, a PO overtightening things, or maybe not using the copper seal ring....
to me it looked like the oil pressure gauge sender (with washer) from here, not the idiot light sender (no washer on this as the threads are coned / edit: tapered!)
The idiot light sender is on the alternator side, the gauge sender is above the starter motor....which is it in that photo?
You might be able to get away with some sealer as long as some of the threads are holding.........if it goes around and around by hand, I would not trust it at all.
Personally it'd scare me thinking one day the thing might fall out altogether..
Only real repair (if it is the gauge sender) is a heli coil.......but getting down there is not gonna be easy, if at all.
If indeed it is the idiot light sender, then sealant should do it.....but it still shouldn't turn round 'n round, as the threads being coned, get tighter and tighter.