My recommendation in this scenario would be to trim the wood siding 1 4 inch minimally or better yet 6 to 8 above the concrete area.
How to seal siding to concrete.
Before applying check the weather.
Look under the siding at the area meeting the foundation of your home for holes and gaps.
If your concrete is new you ll need to let it cure wait at least one month before applying sealer.
Might be good but it s more designed for sealing air insects and separating wood from concrete.
Find the entrances mice use to enter your home.
Theoretically you could seal the tar paper to the foundation with foam spray caulking something similar.
Note that there are various types of caulk.
Sealer needs to be applied in dry conditions because it won t adhere to damp concrete.
How to seal siding to keep out mice.
Since some of the siding looks like it will need re priming and painting make sure that you use a paintable type of caulk.
The best solution here may be to clean up that area of all debris let it be fully dry and then apply a bead of qood quality exterior grade caulking material.
Your first attempts won t come out very well messy lots of holes goop all over the concrete and the wood stiff fingers and sticky stuff all over your clothes and hands.
If you go inches which you should install aluminum flashing for example.
Buy yourself a caulking gun learn how to mount and open a tube of caulk and go to it.
Crawl around the exterior of your home and use a flashlight to find cracks holes and gaps.
The temperature also needs to stay above 50 f during application and drying time up to three days.
Not a vapor barrier as you say but it prevents water that makes it past the siding from getting any further into the wall.
I believe you have tar paper under your siding based on your description.