Delete the selected edges using BACKSPACE, not Delete. This way you will keep the polygons adiacent to the deleted edges. These polygons will form the top and bottom of the barrel.
Go back to the Edit Poly modifier, pick the Polygons subobject and select the top and bottom of the barrel.
Go to the Bevel tool and click on the small icon on its side. This will open the Bevel dialog box. Enter -3 for Height and 0.65 for Outline Amount and then hit OK.
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