New construction using a replacement window
 

Lowes had their Pella 20 series windows marked down to around $30. I bought several of them and plan to replace my 35 year-old aluminum windows. Here is where I need guidance.

I am tearing out an outside wall (app. 14' running). I will frame up using 2X4s and cover w/ sheathing/housewrap. I then will set the replacements flush w/ sheathing. I will then case the outside out using Hardi trim, and will return inside with conventional 1 bys.

Is this the way to go? The replacement window is wider than a nail-on, so my interior return will not be as deep.