Got a real mess there.
#1 That sidng block is only held in place with 2 nails where it needs at least 4.
Looks like someone forgot to bring there key hole saw that day and made the hole with a hammer.
Would be a whole lot better with a siding block like this so the only hole would have been one big enough for the wire.
I'd be very surprized if that siding was even flashed correctly where it meets the deck.
If it was mine I'd be removing the siding in that area to see what's going on, cutting out that nasty Cellotex between the studs and replacing it with OSB or plywood so you would have something to attach the siding block to.
Making sure there was Tyvek on the wall.
Installing the new siding block and using window tape around it to seal it.