Yes you should use teflon tape for normal threaded fittings, but not for flared or compression fittings. For diesel yellow teflon tape is normally used. When googling this I found a different solution below that makes a good case for liquid thread sealant instead of tape.
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Brian
Living aboard in Victoria Harbour
Use the paste/liquid version for fuel and hydraulic lines as mentioned above. It can be found in most hardware stores, I am curently using a bottle of Taylors DIY's own labled product.
If you do decided to use tape just be careful not to have any of the tape extend past the lowest tread. Air systems etc are all prone to issues if they get little pieces of tape in the wrong spot but careful application should avoid this.
Like mitiempo stated be sure to use tape that's made for diesel systems. Otherwise the diesel will eventually break it down and you can end up with bits of it clogging your fuel system. Another option is to use a Locktite type product made for diesel fuel systems. Sorry I can't remember specifically what I used.
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