That's the stuff I always used, too, the stuff you'd get at the hardware store to put in those little chalk line tools. It's cheap. And it comes in different colors, too... at least it used to.
Yup, mix with water, paint it on the plate. Smack on the pinblock blank with a rubber mallet and grind off the chalk marks. Repeat as necessary to get a good fit.
Wouldn't surprise me to hear of a good epoxy being used to fill the gap these days, but the chalk n grind is how we used to do 'em.
Brian