That smooth area is to grab it with a wrench without damaging the threads. If you look carefully, you'll see some light marks from a prior tightening (or loosening).
That looks really clean, which is a little odd. If have expected so me type of thread sealant.
Having said that, I wouldn't use lock tight or similar on that piece. Save that stuff for bolts the next owner will need to mess with
It really isn't for pipe thread.
I'd just use some pipe thread sealant paste. I like then permatex high temp for applications like this.
You don't need to lock it in place with thread locker.. The principle here is that the nipple should be solidly (but not crazily) wrench tight -- and the filter hand tight, maybe plus a hair. If one does this, backing out the filter won't back out the nipple.
Remember, the filter need not be tight to seal, it has an integrated rubber gasket at the top. It just need to be tight enough so that gasket is securely engaged all around and so that it won't spin itself out.
If that nipple came out, I have to assume that it came out because it wasn't wrench tight originally, or the filter was ocer-rightened, or both.
If it ever gets cross threaded and damaged, you'll be really glad you used only a thread sealant and not something that'll take more than a wrench to undo. Powerful thread lockers can powerfully secure a small screw -- think about the surface area of that pipe thread.