Toilets, Sinks, Showers, Tubs and Disposals - New Installation of bathroom faucet issues

I am remodeling my bathroom. I removed the laminate top, sink and "builders special" faucet. I put in a solid surface top from HD. I bought a nice faucet to put in, but the manufacturers instructions were not that great so here I am. Now you have to bear with me because I am not a plumber (obviously) and do not know all the right terms for all faucet parts. The problem I am having is that I can't seem to seal the drain. The cylindrical shank has two holes close to the top where the flange threads into. Does this hole have to line up with the overflow hole in the sink? There are two rubber gaskets on the main shank. Do I place both at the bottom of the opening of the new sink and thread it up with the nut until snug? Do I caulk/tape this? Does one of them have to go underneath the flange? Do I only use one of them? The directions that came with both the faucet and sink really sucked. Oh geeze, I am so frustrated. I can install tile like a pro but this damn pluming stuff makes me nuts. Is there really an easy solution and I am too blind to see it? Someone please help. Thanks.

No washer goes under the flange. The flange should be cushioned with a big wad of plumbers putty, or on natural stone materials use silicone.

Under the sink there should be a fat washer and a thin hard nylon or fibre friction washer. I like to rub putty in the threads across the area where these washer will seal. Snug them up, but overtightening can distort the rubber.