When installing the anode does it make a difference if you use teflon tape or pipe sealant on the threads?
I used PTFE, but I think either or both would be good. You might worry that PTFE would insulate the interface, but no. The threads cut right through the PTFE, and provide electrical continuity. What I would do is to not torque the new anode to nearly as it came to you. I would go about 15 ft-lb. Watch for any signs of a leak, and try another 1/8 turn in that case. Not over-torquing would make it much easier if you had to change the anode again.
Also which is better, magnesium (Mg) or aluminum? The supply house said the WH came with an aluminum anode. This is on an A.O. Smith Electric 50 gal. WH on well water.
Magnesium is better at protecting the WH, but it is more reactive with sulfur bacteria to help produce H2S from sulfate from the water. Aluminum+zinc rods (what the "aluminum" rods are) are less helpful to the SRB. Some just replace the anode with a brass plug, and with some waters, the WH lasts maybe 10 years or so with no anode. In some waters, even with a working anode, you might only get 10 years. I expect 30 or more years myself, but I have low-corrosivity water. Plus I have a powered anode.
A powered anode can protect like Mg but not feed SRB. I think the one with the long electrode is going to protect better than one with a stubby anode. But $$$ vs $$ for stubby. For more thoughts on powered anodes, use the search box above or ask for more info.