Will water will seep in the barrels even when they are plugged. Just don't drive wooden ones too deep as they can be very hard to remove. I coat the inside with shellac, tries very fast and helps to keep rust away especially some barrels that have pitts.
The plugs act as an extension and keep the barrels from touching in the rusting box. I have stands in the box, one end is move able and the other is fixed.
I don't plug the little hole, that is why it is there to let the water out. On the last rusting/etching, I heat the barrels with a propane torch, very warm to the touch and this helps to evaporate the rust, some that doesn't will run out of this hole. I usually tilt the barrels so that this hole is on the inside and it helps to get the water out.
I also use a feeler gage, .001.002 and go along both the top and bottom rib, you will be surprised of the voids, don't worry about it. The main thing is you don't want any of the rusting solution is come out of these voids while the barrels are drying, especially on your last rusting/etch.