How do we remove a 1940 Crane tub spout base adapter that is inside the wall?
FIXED IT. I found a better solution: heat-shrink tubing. I couldn't get gasket material to reliably adhere to the metal with epoxy, as Tim suggested.

I used heat-shrink tubing with an expanded diameter of ~1.5 inches. It's 3M brand, but I'm not sure which specific product. I used a hair dryer to shrink it because I don't have a heat gun.

It seals well and has held up almost a year already with no obvious signs of wear. When it does wear out, I'll cut it off and shrink another piece on.