What should I use to seal this window?
You'll want to use glazing compound, which comes in both oil-based, and latex, and can be found in both cans or tubes.

Once you have the glass removed, and the frame cleaned up. 


Run a bead of glazing compound around the frame (where the glass will sit).
Set the glass in the compound giving it a little wiggle to work out any air bubbles, and to make sure the glass is set in properly (don't worry about a little excess oozing out, you can trim it off later when it cures).
Using a putty knife push in glazing points every 6-8 in.





Install the interior trim, and wait for the glazing compound to cure.
Once the compound has cured enough (24-72 hours), using a utility knife carefully trim off any compound that has oozed out.
If you are not using interior trim, you will want to apply a bead of glazing compound to the interior side of the frame, and use a putty knife to smooth it to a nice finish.
After 7-10 days you can paint the glazing compound to match the frame.