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that seal is a high temp exhaust packing rope.  and used with antiseize 

the rope goes inside the flare of the sliding pipe. 

i would check for any other exhaust leaks at the genny as well. 

my experience is that wall on the back of the genny is not likely to be your culprit.  but that doesnt mean it couldnt be. 

tom

Revisiting this as I replaced that packing material last fall and while it is better, I still have exhaust gas coming in at the joint in the slide floor behind drivers seat.

What would you look for first?  

You know you need to get this fixed when your spouse says “so are our clothes always going to smell like this?”