Is the house being resided? I'm wondering why there is felt on the wall? ..If so, the whole project is kinda hack-style, but it will work. You should add flashing tape then install new trim, flashing, and siding... Given the apparent circumstances, a pocket style replacement probably would've been a better choice... Or if you really want it done properly, tear off the old siding, then reinstall the windows.
Replacement Windows, doors, siding, roofing, insulation, and BPI certified energy consulting, Building Analyst 5051322 www.HomeSealed.com