I've actually done the whole pvc
pipe covered in silicone and rolled in sand thing and wasnt too happy with the results. I would suggest you find the largest grain sand you can as the small stuff doesnt fill-in very well, or put a bunch of silicone in a cup, mix the sand in to make a thick sandy paste, the paint it on with a popsicle stick (its alot thicker this way). Also just a warning, any part (thats covered in sand) exposed to the water will grow algae like crazy.
However if you need cheap caves this hole thing (no matter how you do it) works fine. I started my tank with a 4" Y and a 2" L as the main decorations. so far the Y is still in the tank, but its covered in a green and brown/red algae (which strangely has given it character, but took 2 months for the algae to turn green).
My next project is a 2" T with the top of the T cut off creating a burried cave for my Kuhli loaches that i can have against the glass so I can see them (prettymuch close to what your doing). Was gonna do that back when i made the others but my dremel died on me making the big 4' Y... (got a new one now though ^_^)
These pics are old (no green), but they give you a basic idea. I dunno if you can see them without being a member there, but hopefully you can. Whole Tank Just The Y