I installed a dual pole VDO sender with the kit it came with and am leaking oil at the
female NPT connector joint. The female nut rotates independently of the tube.

I'm not sure how that joint seals. Is there an o-ring in there that may have dried out since this is NOS?

Would it be okay to cut the tube and replace with a barbed to 1/8" NPT female fitting?

Click to view attachment

Just go get a Grease gun extension hose.

Same threads and will probably cost the same as a brass hose barb.