That is one idea we have went over. If the plumbing rubber boot material was an option that would be a very easy to implement solution. However all I find are Elastomeric Polyvinyl Chloride boots, and the temperature rating is too low. This would be a great solution for holding the two tubes in position and sealing the bottom. I'm tempted to try it and replace it every few months!Another option that you might consider, make the intersection of the pipes at the bottom of the larger pipe a slip joint. Raise or lower the inner pipe as needed, rather than trying to seal holes. You could use an o-ring or a nylon seal like the finish plumbing slip joints under your sink to seal that connection.
Thanks, Mikek